<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1996
REGISTRATION NO. 333-03741
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
MUZAK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7389
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL 91-1722302
JURISDICTION OF CLASSIFICATION CODE NUMBERS) (I.R.S. EMPLOYER
INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION)
---------------
2901 THIRD AVENUE, SUITE 400
SEATTLE, WA 98121
(206) 633-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
MR. JOHN R. JESTER
PRESIDENT
MUZAK, INC.
2901 THIRD AVENUE, SUITE 400
SEATTLE, WA 98121
(206) 633-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
STEPHEN H. COOPER, LOUISA BARASH, ESQ. CHRISTOPHER J. BARRY,
ESQ. HELLER, EHRMAN, WHITE & MCAULIFFE ESQ.
WEIL, GOTSHAL & MANGES 701 FIFTH AVENUE, SUITE 6100 BOGLE & GATES P.L.L.C.
LLP SEATTLE, WA 98104 TWO UNION SQUARE,
767 FIFTH AVENUE (206) 447-0900 601 UNION STREET
NEW YORK, NY 10153 SEATTLE, WA 98101
(212) 310-8000 (206) 682-5151
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.01 par
value.................. $74,175,000 $25,578
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- -----------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
MUZAK, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
--------------------------------------- ----------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Inside Front Cover Page;
Prospectus..................................... Available Information; Outside
Back Cover Page
3. Summary Information, Risk Factors and Ratio of Outside Front Cover Page;
Earnings to Fixed Charges...................... Prospectus Summary; Risk
Factors; The Company
4. Use of Proceeds................................. Prospectus Summary; The
Recapitalization; Use of
Proceeds
5. Determination of Offering Price................. Outside Front Cover Page; Risk
Factors; Underwriting
6. Dilution........................................ Risk Factors; Dilution
7. Selling Security Holders........................ Certain Relationships and Related
Transactions; Principal and
Selling Stockholders
8. Plan of Distribution............................ Outside Front Cover Page;
Underwriting
9. Description of Securities to be Registered...... Outside Front Cover Page;
Prospectus Summary; Dividend
Policy; Description of Capital
Stock
10. Interests of Named Experts and Counsel.......... Legal Matters
11. Information with Respect to the Registrant...... Outside Front Cover Page;
Prospectus Summary; Risk
Factors; The Company; Use of
Proceeds; Dividend Policy;
Dilution; Capitalization;
Selected Financial Data; Pro
Forma Financial Data;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Business; Management; Certain
Relationships and Related
Transactions; Principal and
Selling Stockholders; Shares
Eligible for Future Sale;
Description of Capital Stock;
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Not Applicable
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the Registrant's estimated expenses in
connection with the issuance of the securities being registered, other than
underwriting discounts and commissions.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............. $ 25,578
NASD Filing Fee................................................. 7,918
Printing and Engraving Expenses................................. *
Counsel Fees and Expenses....................................... *
Financial Advisory Fee.......................................... $250,000
Accountants' Fees and Expenses.................................. *
Blue Sky Fees and Expenses...................................... *
Transfer Agent and Registrar Fees and Expenses.................. *
Nasdaq National Market Listing Fee.............................. *
Director and Officer Insurance Premiums......................... *
Miscellaneous................................................... *
--------
Total......................................................... $ *
========
</TABLE>
- --------
* To be filed by amendment
All such fees and expenses have been or will be paid by the Registrant.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL"), the law of the state in which the Registrant is incorporated,
empowers a corporation within certain limitations to indemnify a director,
officer, employee or agent of the corporation and certain other persons
serving at the request of the corporation in related capacities against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonable incurred by him in connection with any
action, suit or proceeding to which he is or was threatened to be a party
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, as long as he acted in good faith
and in a manner which he reasonably believed to be in, or not opposed to, the
best interests of the corporation. With respect to any criminal proceeding, he
must have had no reasonable cause to believe his conduct was unlawful. No such
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the Court in which such action or suit was brought shall determine
upon application that despite the adjudication of liability but in view of all
of the circumstances of the case such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery of the State of
Delaware or such other court shall deem proper.
The Certificate of Incorporation of the Registrant provides that any person
may be indemnified against all expenses and liabilities to the fullest extent
permitted by the DGCL. The By-Laws allow the Registrant to advance or
reimburse litigation expenses upon submission by the director, officer or
employee of an undertaking to repay such advances or reimbursements if it is
ultimately determined that indemnification is not available to such director,
officer or employee and allow the Registrant to purchase and maintain
insurance for its directors and officers against liability asserted against
them in such capacity whether or not the Registrant would have the power to
indemnify them against such liability. The Registrant intends to acquire
directors' and officers' liability insurance.
II-1
<PAGE>
As permitted by Section 102 of the DGCL, the Certificate of Incorporation of
the Registrant provides that no director shall be liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director other than (i) for breaches of the director's duty of loyalty to the
Registrant and its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
for the unlawful payment of dividends or unlawful stock purchases or
redemptions under Section 174 of the DGCL and (iv) for any transaction from
which the director derived an improper personal benefit.
The Underwriting Agreement being filed as Exhibit 1 hereto provides for
indemnification of directors and officers of the Registrant under certain
circumstances, including for liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the closing of the acquisition of the franchises of
Comcast Sound Communications, Inc. ("Comcast"), on January 31, 1994, the
Registrant issued a $5.0 million 7% preferred limited partnership interest of
the Partnership to Comcast. This transaction was exempt from registration under
Section 4(2) of the Securities Act as not involving a public offering. No
underwriter was involved in the transaction.
In November 1994, the Registrant amended its senior credit facility whereby
the Company's $10.0 million loan from Union Bank of Switzerland, New York
Branch, was repaid in full with proceeds from a subordinated financing
involving the sale of $7.0 million additional preferred partnership interests
to existing investors, including MLP Holdings L.P. and certain senior managers
of the Registrant, with a pledge of the limited partnership interests to the
lenders under the senior credit facility and an increase in the number of units
subject to the option agreement of Barclays Bank PLC, New York Branch. This
transaction was exempt from registration under Section 4(2) of the Securities
Act as not involving a public offering. No underwriter was involved in the
transaction.
In May 1996, prior to the filing of the Registration Statement, the general
and limited partners of the Partnership agreed to exchange the outstanding
partnership interests in the Partnership for cash and shares of Common Stock
pursuant to the Exchange and Transfer Agreement as part of the Recapitalization
described under "The Recapitalization" in the Prospectus. This transaction was
exempt from registration under Section 4(2) of the Securities Act as not
involving a public offering. No underwriter was involved in the transaction.
In addition, as part of the Recapitalization, options to purchase partnership
interests outstanding under the Partnership's Management Option Plan will be
replaced with options to purchase shares of Common Stock under the Company's
Replacement Stock Option Plan. To the extent such transaction constitutes an
offer and sale of securities, such transaction is exempt from registration
under Section 4(2) of the Securities Act as not involving a public offering
and/or Rule 701 under the Securities Act. No underwriter is involved in the
transaction.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Registration Statement:
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
* 1 --Form of Underwriting Agreement
** 2 --Exchange and Transfer Agreement dated as of May 10, 1996, among
Muzak, Inc., Music Holdings Corp., the holders of partnership
interests of Muzak Limited Partnership, Barclays Bank PLC and
Exeter Venture Lenders, L.P.
** 3.1 --Certificate of Incorporation of the Registrant
** 3.2 --By-Laws of the Registrant
** 4.1 --Stockholders' Agreement of the Registrant
* 5 --Opinion of Weil, Gotshal & Manges LLP
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
+10.1 --Asset Purchase Agreement dated as of March 11, 1992, among Muzak
Limited Partnership, Field/Muzak Inc., The Field Corporation and MLP
Operating, L.P., as amended by Muzak Limited Partnership's letters
dated April 22, 1992, August 6, 1992 and August 20, 1992, Amendment
No. 1 dated as of June 26, 1992, Amendment No. 2, dated July 31, 1992
and Amendment No. 3, dated as of August 26, 1992
10.2 --Asset Purchase Agreement and Contribution Agreement dated as of
November 24, 1993 among Comcast Corporation, et al. and Muzak Limited
Partnership
10.3 --Amended and Restated Credit Agreement dated as of September 4, 1992,
as amended as of October 22, 1992 and as of December 15, 1993; and as
amended and restated as of January 31, 1994 among Muzak Limited
Partnership, Union Bank of Switzerland, New York Branch,
Internationale Nederlanden (U.S.) Capital Corporation and the other
Lenders parties thereto and Union Bank of Switzerland, New York
Branch, as Agent; as amended by Waiver and Agreement dated as of
February 10, 1994; Waiver and Amendment No. 1 dated as of October 31,
1994; Waiver and Amendment No. 2 dated as of November 2, 1994;
Amendment No. 3 and Consent dated as of November 4, 1994; Amendment
No. 4 to Amended and Restated Credit Agreement dated as of November
17, 1994; Waiver dated January 10, 1995; Waiver dated as of July 31,
1995; Amendment No. 5 to Amended and Restated Credit Agreement dated
as of November 7, 1995; and Waiver dated as of April 1, 1996
10.4 --Amended and Restated Term Notes issued as of September 4, 1992,
amended and restated as of January 31, 1994
10.5 --Subordinated Loan Agreement dated as of September 4, 1992, as
amended, between Muzak Limited Partnership and Barclays Bank PLC, New
York Branch
10.6 --Option Agreement dated as of September 4, 1992 between Muzak Limited
Partnership and Barclays Bank PLC, New York Branch
+10.7 --Uplink Facility Agreement dated as of December 28, 1995 between
EchoStar Satellite Corporation and Muzak Limited Partnership
+10.8 --DBS Programming Affiliation Agreement dated as of December 28, 1995
between EchoStar Satellite Corporation and Muzak Limited Partnership
+10.9 --Video Programming Sales Agent Agreement dated as of December 28,
1995 between EchoStar Satellite Corporation and Muzak Limited
Partnership
+10.10 --Form of Muzak(R) Participating Affiliate Agreement
10.11 --Third and Broad Office Lease dated June 8, 1994, between Martin
Selig and Muzak Limited Partnership
10.12 --ASCAP License
10.13 --Joint Venture Agreement dated August 2, 1995 between Muzak Limited
Partnership and Alcas Holdings B.V.
10.14 --Muzak(R) Master Affiliate Agreement (Mexico) dated March 1, 1992
between Muzak Limited Partnership and Audioplan S.A.
10.15 --Muzak(R) Master Affiliate Agreement (Canada) dated August 30, 1990
between Muzak Limited Partnership and Chum Limited, as amended--Form
of Underwriting Agreement
10.16 --FCC Licenses
10.17 --Form of License Agreement (New Franchise Agreement), as amended
10.18 --Form of Music Services Agreement
10.19 --Form of Multi-Territory Account Service Agreement
10.20 --Form of Sales of Adjunct Services and Form of Muzak Adjunct Services
Subscriber Agreement
+10.21 --Transponder Lease Agreement dated December 9, 1993 between
Microspace Communications Corporation and Muzak Limited Partnership
+10.22 --Transmission Lease Agreement dated January 31, 1995 between
Microspace Communications Corporation and Muzak Limited Partnership
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
+10.23 --Transponder Lease Agreement dated January 31, 1995 between
Microspace Communications Corporation and Muzak Limited Partnership
+10.24 --Transponder Lease Agreement dated April 27, 1995 between Microspace
Communications Corporation and Muzak Limited Partnership
+10.25 --Transponder Lease Agreement dated July 5, 1995 between Microspace
Communications Corporation and Muzak Limited Partnership
+10.26 --Transponder Lease Agreement dated April 29, 1996 between Microspace
Communications Corporation and Muzak Limited Partnership
+10.27 --Agreement to Provide Telecommunications Service dated August 8 and
9, 1995 between Keystone Communications Corporation and Muzak Limited
Partnership
+10.28 --Sales Agreement and License dated September 28, 1995 between
Mainstream Data, Inc. and Muzak Limited Partnership
10.29 --Muzak Limited Partnership Tempo Savings and Retirement Plan
10.30 --Muzak Limited Partnership Tempo Savings and Retirement Trust
10.31 --Muzak Limited Partnership Management Incentive Plan
10.32 --Muzak Limited Partnership Management Option Plan
*10.33 --Muzak, Inc. Senior Management Stock Option Plan
*10.34 --Muzak, Inc. 1996 Employee Stock Option Plan
10.35 --Employment Agreement dated August 31, 1992 of John R. Jester
10.36 --Employment Agreement dated August 31, 1992 of James F. Harrison
10.37 --Employment Letter dated July 7, 1995 of Kirk A. Collamer
**11 --Calculations of pro forma net loss attributable to common
stockholders per share and supplemental pro forma net loss
attributable to common stockholders per share
**21 --List of Subsidiaries of the Registrant
**23.1 --Consent of Deloitte & Touche LLP and Report on Financial Statement
Schedule of Muzak Limited Partnership
**23.2 --Consent of Deloitte & Touche LLP
*23.3 --Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5)
**24 --Power of Attorney (included on the signature page to this
Registration Statement)
**27 --Financial Data Schedules
</TABLE>
- --------
* To be filed by amendment
** Previously filed
+ Confidential treatment requested
<TABLE>
<C> <S>
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts and Reserves
</TABLE>
All other Schedules have been omitted because the information is not
applicable or is presented in the financial statements or the notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-4
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant under the General Corporation Law of the
State of Delaware or pursuant to the Registrant's Certificate of Incorporation
or By-Laws or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Seattle, State of
Washington, on May 31, 1996.
MUZAK, INC.
(Registrant)
*
By __________________________________
John R. Jester
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
Chairman, President and
* Chief Executive Officer May 31, 1996
_____________________________________ (Principal Executive
JOHN R. JESTER Officer)
/s/ Kirk A. Collamer Vice President and Chief
_____________________________________ Financial Officer May 31, 1996
KIRK A. COLLAMER (Principal Financial
Officer and Principal
Accounting Officer)
Director
* May 31, 1996
_____________________________________
BRUCE G. POLLACK
Director
* May 31, 1996
_____________________________________
PAUL F. BALSER
Director
* May 31, 1996
_____________________________________
MARK E. JENNINGS
/s/ Kirk A. Collamer
By______________________________
Kirk A. Collamer Attorney-in-fact
II-6
<PAGE>
MUZAK LIMITED PARTNERSHIP
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II (REG 210.12-09)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
--------------------- ----------
WRITE-
BALANCE AT CHARGED TO CHARGED TO OFFS, NET BALANCE
BEGINNING COSTS AND OTHER OF AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS RECOVERIES PERIOD
----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1995
Allowance for Doubtful
Accounts............... $736,000 $810,000 ($914,000) $632,000
======== ======== ========= ========
YEAR ENDED DECEMBER 31,
1994
Allowance for Doubtful
Accounts............... $558,000 $610,000 $359,000(a) ($791,000) $736,000
======== ======== ======== ========= ========
YEAR ENDED DECEMBER 31,
1993
Allowance for Doubtful
Accounts............... $648,000 $464,000 ($554,000) $558,000
======== ======== ========= ========
</TABLE>
- --------
(a) Comcast Acquisition as of January 31, 1994.
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
* 1 --Form of Underwriting Agreement
** 2 --Exchange and Transfer Agreement dated as of May 10, 1996,
among Muzak, Inc., Music Holdings Corp., the holders of
partnership interests of Muzak Limited Partnership, Barclays
Bank PLC and Exeter Venture Lenders, L.P.
** 3.1 --Certificate of Incorporation of the Registrant
** 3.2 --By-Laws of the Registrant
** 4.1 --Stockholders' Agreement of the Registrant
* 5 --Opinion of Weil, Gotshal & Manges LLP
+10.1 --Asset Purchase Agreement dated as of March 11, 1992, among
Muzak Limited Partnership, Field/Muzak Inc., The Field
Corporation and MLP Operating, L.P., as amended by Muzak
Limited Partnership's letters dated April 22, 1992, August 6,
1992 and August 20, 1992, Amendment No. 1 dated as of June 26,
1992, Amendment No. 2, dated July 31, 1992 and Amendment No. 3,
dated as of August 26, 1992
10.2 --Asset Purchase Agreement and Contribution Agreement dated as
of November 24, 1993 among Comcast Corporation, et al. and
Muzak Limited Partnership
10.3 --Amended and Restated Credit Agreement dated as of September 4,
1992, as amended as of October 22, 1992 and as of December 15,
1993; and as amended and restated as of January 31, 1994 among
Muzak Limited Partnership, Union Bank of Switzerland, New York
Branch, Internationale Nederlanden (U.S.) Capital Corporation
and the other Lenders parties thereto and Union Bank of
Switzerland, New York Branch, as Agent; as amended by Waiver
and Agreement dated as of February 10, 1994; Waiver and
Amendment No. 1 dated as of October 31, 1994; Waiver and
Amendment No. 2 dated as of November 2, 1994; Amendment No. 3
and Consent dated as of November 4, 1994; Amendment No. 4 to
Amended and Restated Credit Agreement dated as of November 17,
1994; Waiver dated January 10, 1995; Waiver dated as of July
31, 1995; Amendment No. 5 to Amended and Restated Credit
Agreement dated as of November 7, 1995; and Waiver dated as of
April 1, 1996
10.4 --Amended and Restated Term Notes issued as of September 4,
1992, amended and restated as of January 31, 1994
10.5 --Subordinated Loan Agreement dated as of September 4, 1992, as
amended, between Muzak Limited Partnership and Barclays Bank
PLC, New York Branch
10.6 --Option Agreement dated as of September 4, 1992 between Muzak
Limited Partnership and Barclays Bank PLC, New York Branch
+10.7 --Uplink Facility Agreement dated as of December 28, 1995
between EchoStar Satellite Corporation and Muzak Limited
Partnership
+10.8 --DBS Programming Affiliation Agreement dated as of December 28,
1995 between EchoStar Satellite Corporation and Muzak Limited
Partnership
+10.9 --Video Programming Sales Agent Agreement dated as of December
28, 1995 between EchoStar Satellite Corporation and Muzak
Limited Partnership
+10.10 --Form of Muzak(R) Participating Affiliate Agreement
10.11 --Third and Broad Office Lease dated June 8, 1994, between
Martin Selig and Muzak Limited Partnership
10.12 --ASCAP License
10.13 --Joint Venture Agreement dated August 2, 1995 between Muzak
Limited Partnership and Alcas Holdings B.V.
10.14 --Muzak(R) Master Affiliate Agreement (Mexico) dated March 1,
1992 between Muzak Limited Partnership and Audioplan S.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
10.15 --Muzak(R) Master Affiliate Agreement (Canada) dated August 30,
1990 between Muzak Limited Partnership and Chum Limited, as
amended--Form of Underwriting Agreement
10.16 --FCC Licenses
10.17 --Form of License Agreement (New Franchise Agreement), as
amended
10.18 --Form of Music Services Agreement
10.19 --Form of Multi-Territory Account Service Agreement
10.20 --Form of Sales of Adjunct Services and Form of Muzak Adjunct
Services Subscriber Agreement
+10.21 --Transponder Lease Agreement dated December 9, 1993 between
Microspace Communications Corporation and Muzak Limited
Partnership
+10.22 --Transmission Lease Agreement dated January 31, 1995 between
Microspace Communications Corporation and Muzak Limited
Partnership
+10.23 --Transponder Lease Agreement dated January 31, 1995 between
Microspace Communications Corporation and Muzak Limited
Partnership
+10.24 --Transponder Lease Agreement dated April 27, 1995 between
Microspace Communications Corporation and Muzak Limited
Partnership
+10.25 --Transponder Lease Agreement dated July 5, 1995 between
Microspace Communications Corporation and Muzak Limited
Partnership
+10.26 --Transponder Lease Agreement dated April 29, 1996 between
Microspace Communications Corporation and Muzak Limited
Partnership
+10.27 --Agreement to Provide Telecommunications Service dated August 8
and 9, 1995 between Keystone Communications Corporation and
Muzak Limited Partnership
+10.28 --Sales Agreement and License dated September 28, 1995 between
Mainstream Data, Inc. and Muzak Limited Partnership
10.29 --Muzak Limited Partnership Tempo Savings and Retirement Plan
10.30 --Muzak Limited Partnership Tempo Savings and Retirement Trust
10.31 --Muzak Limited Partnership Management Incentive Plan
10.32 --Muzak Limited Partnership Management Option Plan
*10.33 --Muzak, Inc. Senior Management Stock Option Plan
*10.34 --Muzak, Inc. 1996 Employee Stock Option Plan
10.35 --Employment Agreement dated August 31, 1992 of John R. Jester
10.36 --Employment Agreement dated August 31, 1992 of James F.
Harrison
10.37 --Employment Letter dated July 7, 1995 of Kirk A. Collamer
**11 --Calculations of pro forma net loss attributable to common
stockholders per share and supplemental pro forma net loss
attributable to common stockholders per share
**21 --List of Subsidiaries of the Registrant
**23.1 --Consent of Deloitte & Touche LLP and Report on Financial
Statement Schedule of Muzak Limited Partnership
**23.2 --Consent of Deloitte & Touche LLP
*23.3 --Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5)
**24 --Power of Attorney (included on the signature page to this
Registration Statement)
**27 --Financial Data Schedules
</TABLE>
- -------
* To be filed by amendment
** Previously filed
+ Confidential treatment requested
<PAGE>
Exhibit 10.1
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been separately
filed with the Commission.
ASSET PURCHASE AGREEMENT
dated as of March 11, 1992
among
MUZAK LIMITED PARTNERSHIP
FIELD/MUZAK, INC.
THE FIELD CORPORATION
and
MLP OPERATING, L.P.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C> <C>
ARTICLE I PURCHASE AND SALE............................ 1
1.1. Purchased Assets.......................... 1
1.2. Excluded Assets........................... 4
1.3. Assumed Liabilities....................... 5
1.4. Excluded Liabilities...................... 6
1.5. Transfer of Purchased Assets.............. 7
1.6. Conveyance and Transfer................... 7
1.7. Sales, Transfer and Related Taxes
and Charges............................... 8
1.8. Proration................................. 8
ARTICLE II PURCHASE PRICE............................... 9
2.1. Purchase Price............................ 9
2.2. Allocation of Purchase Price.............. 9
2.3. Purchase Price Adjustment................. 10
2.4. Calculation of Closing Payment and
Payment of Purchase Price................. 12
2.5. Earn-Out.................................. 14
ARTICLE III CLOSING...................................... 22
3.1. Closing Date.............................. 22
3.2. Seller's Closing Deliveries............... 22
3.3. Buyer's Closing Deliveries................ 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER
AND TFC...................................... 25
4.1. Organization of Seller, General Partner
and TFC................................... 25
4.2. Subsidiaries and Investments.............. 25
4.3. Authority of Seller, General Partner
and TFC; Non-Contravention................ 25
4.4. Financial Statements...................... 28
4.5. Absence of Changes........................ 29
4.6. No Undisclosed Liabilities................ 30
4.7. Taxes..................................... 31
4.8. Condition of Assets; Ownership of Assets.. 31
4.9. Governmental Permits...................... 32
4.10. Real Property............................. 32
4.11. Real Property Leases...................... 32
4.12. Condemnation.............................. 32
4.13. Personal Property; Sufficiency of Assets.. 33
4.14. Personal Property Leases.................. 33
4.15. Intellectual Property..................... 33
4.16. Accounts Receivable....................... 34
4.17. Environmental Matters..................... 34
</TABLE>
i
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<TABLE>
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<S> <C> <C> <C>
4.18. Employees and Related Agreements; ERISA... 35
4.19. Contracts................................. 40
4.20. Music Services Contracts.................. 42
4.21. Status of Contracts....................... 43
4.22. No Violation, Litigation or Regulatory
Action.................................... 44
4.23. Insurance................................. 44
4.24. Organization, Capitalization and Financial
Statements of the German Licensee......... 44
4.25. Transactions with Affiliates and Trusts... 45
4.26. Investment Canada......................... 45
4.27. Personnel................................. 45
4.28. Inventory................................. 45
4.29. Customers and Suppliers................... 46
4.30. FCC Compliance............................ 46
4.31. Torrance Note............................. 47
4.32. No Finder................................. 47
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...... 47
5.1. Organization of Buyer..................... 47
5.2. Authority of Buyer; Non-Contravention..... 48
5.3. Priority Partnership Interest;
Exchange Notes............................ 49
5.4. No Prior Activities; No Subsidiaries...... 49
5.5. Capitalization; Financing................. 49
5.6. Financial Ability......................... 50
5.7 Buyer Sales............................... 50
5.8 No Finder................................. 50
ARTICLE VI ACTION PRIOR TO THE CLOSING DATE............. 50
6.1. Investigation of Seller by Buyer;
Environmental Audit....................... 50
6.2. Notices................................... 51
6.3. Other Action; Consents of Third Parties;
Governmental Approvals.................... 52
6.4. Conduct of the Business Prior to
the Closing............................... 52
6.5. Antitrust Compliance, etc................. 54
6.6. FCC Compliance............................ 54
6.7. Exon-Florio............................... 55
6.8. Seller's Disclosure....................... 55
6.9 Taxes..................................... 56
6.10 Proprietary Rights........................ 56
ARTICLE VII ADDITIONAL COVENANTS OF THE PARTIES.......... 56
7.1. Covenant Not to Compete................... 56
7.2. Expenses.................................. 56
7.3. Publicity................................. 57
</TABLE>
ii
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
<TABLE>
<CAPTION>
Page
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<S> <C> <C> <C>
7.4. Employment Matters........................ 57
7.5. W-2 Matters............................... 62
7.6. Post-Closing Remittances.................. 62
7.7. Change in Name............................ 63
7.8. Access to Records After Closing........... 63
7.9. Cooperation in Litigation, Taxes
and Licensing Matters..................... 64
7.10. Modification and Performance of
POP Agreement............................. 64
7.11. FIRPTA.................................... 64
7.12. Intellectual Property Assignments......... 65
7.13. Confidentiality........................... 65
7.14. [**]...................................... 65
7.15. Further Assurances........................ 66
7.16. Cash Available for Checks; Right of
Endorsement; Power of Attorney............ 66
7.17. Bulk Sales; Location of Inventory......... 67
7.18. Purchase Price Escrow..................... 67
7.19. Environmental Matters..................... 67
7.20. Permitted Payments........................ 68
7.21. Amended Partnership Agreement............. 68
7.22. Non-Solicitation.......................... 69
7.23. Employees................................. 69
7.24. No Contest................................ 70
7.25. Discharge of Certain Seller Obligations... 70
7.26. Management Agreements..................... 71
7.27. Subordination Agreements.................. 71
7.28. Continuing Existence of Seller............ 71
7.29. FCC Compliance............................ 71
7.30. German Licensee Shares.................... 71
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS
OF BUYER..................................... 72
8.1. No Misrepresentations or Breach
of Covenants.............................. 72
8.2. No Material Adverse Change................ 72
8.3. Authorizing Action........................ 72
8.4. No Governmental Proceeding or Litigation.. 72
8.5. No Injunction............................. 73
8.6. Necessary Governmental Approvals.......... 73
8.7. Release of Encumbrances................... 73
8.8. Consents.................................. 73
8.9. Seller Deliveries......................... 73
8.10. Financing................................. 73
8.11. [Reserved]................................ 73
8.12. Certificates.............................. 73
8.13. Opinions of Counsel....................... 73
8.14. Subordination Agreements.................. 74
8.15. Taxes..................................... 74
</TABLE>
iii
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<TABLE>
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ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS
OF SELLER.................................... 74
9.1. No Misrepresentation or Breach
of Covenants.............................. 74
9.2. Authorizing Action........................ 74
9.3. No Governmental Proceeding or Litigation.. 74
9.4. No Injunction............................. 75
9.5. Buyer Deliveries.......................... 75
9.6. Necessary Governmental Approvals.......... 75
9.7. Certificates.............................. 75
9.8. Opinion of Counsel........................ 75
9.9. Solvency.................................. 75
9.10. Terms of Debt Financing................... 76
9.11. Management Plans.......................... 76
9.12. Releases.................................. 76
ARTICLE X INDEMNIFICATION.............................. 76
10.1. Survival of Indemnification............... 76
10.2. Indemnification by Seller................. 77
10.3. Indemnification by Buyer.................. 78
10.4. Limitation on Amount of Indemnification... 78
10.5. Notice of Claims.......................... 79
10.6. Third Party Claims........................ 79
10.7. Certain Adjustments....................... 80
10.8. Exclusive Remedy.......................... 80
ARTICLE XI TERMINATION.................................. 80
11.1. Termination............................... 80
11.2. Effect of Termination..................... 81
ARTICLE XII GENERAL PROVISIONS........................... 81
12.1. Successors and Assigns, Parties, etc...... 81
12.2. Entire Agreement; Amendments.............. 83
12.3. Waivers................................... 83
12.4. Notices................................... 83
12.5. Partial Invalidity........................ 84
12.6. Execution in Counterparts................. 85
12.7. Governing Law............................. 85
12.8. Exclusivity............................... 85
ARTICLE XIII DEFINITIONS AND INTERPRETATION............... 85
13.1. Definitions............................... 85
13.2. Interpretation............................ 99
</TABLE>
iv
<PAGE>
EXHIBITS
--------
Exhibit A Form of Earn-Out Notes
Exhibit B Form of Non-Competition Agreement
Exhibit C [RESERVED]
Exhibit D Form of Escrow Agreement
Exhibit E Form of Amended Partnership Agreement
Exhibits F1 - F2 Form of Agreements of Subordination
Exhibit G Form of Certificates of Management
Exhibit H Form of Assumption Agreement
Exhibit I [RESERVED]
v
<PAGE>
SCHEDULES
---------
Schedule 1.1 (XVI) Insurance
Schedule 2.3(b) Exceptions to Seller's Accounting
Principles
Schedule 2.5(a) EBITDA Target Chart
Schedule 4.1(a) List of States where Seller is Qualified
To Transact Business
Schedule 4.1(b) List of States where General Partner is
Qualified to Transact Business
Schedule 4.3 Non-Contravention
Schedule 4.4 Financial Statements
Schedule 4.5(a) Material Adverse Changes
Schedule 4.5(b) Operation of Business Since October
Balance Sheet Date
Schedule 4.6 Undisclosed Liabilities
Schedule 4.7 Taxes
Schedule 4.8 Condition of Assets
Schedule 4.9(b) Governmental Permits
Schedule 4.11 Real Property Leases
Schedule 4.13 Personal Property
Schedule 4.14 Personal Property Leases
Schedules 4.15 Intellectual Property
Schedule 4.17 Environmental Matters
Schedule 4.18 Employees and Related Agreements; ERISA
Schedule 4.19(a) Contracts
Schedule 4.19(a)(vii) Standard Form of Salesman Contract
Schedule 4.19(b) Licensee Agreements
Schedule 4.20 Music Service Contracts
vi
<PAGE>
Schedule 4.21 Status of Contracts
Schedule 4.22 Violations, Litigation and Regulatory
Matters
Schedule 4.23 Insurance
Schedule 4.24 Financial Statements of German Licensee
Schedule 4.25 Transactions with Affiliates and Trusts
Schedule 4.27 Personnel
Schedule 4.28 Inventory
Schedule 4.29 Customer and Supplier Terminations
Schedule 4.30 FCC
Schedule 5.5 Financing Documents
Schedule 7.4(a) Auditor's Report
Schedule 7.15 Estoppel Certificates
Schedule 7.23 Employees
Schedule 8.8 Consents Required for Closing
Schedule 13.11 October Statement
vii
<PAGE>
ASSET PURCHASE AGREEMENT ("Agreement") dated as of March 11, 1992,
among Muzak Limited Partnership, a Delaware limited partnership ("Seller"),
Field/Muzak, Inc., a Delaware corporation ("General Partner"), The Field
Corporation, a Delaware corporation ("TFC"), and MLP Operating, L.P., a Delaware
limited partnership ("Buyer").
WHEREAS, Seller is engaged in the business of on-location and
broadcast business services, which include without limitation producing,
marketing and distributing programmed music, music video services, data
communications services, electronic publication and information distribution
services, video communications services, in-store advertising and promotion
services, related equipment and ancillary communications and related services
(collectively, the "Business");
WHEREAS, Seller conducts the Business through certain divisions of
Seller and in association with licensees ("Licensees"), including "Funktionelle
Musik" Musikverbreitungs gesellschaft mit beschrankter Haftung, a German limited
liability company ("German Licensee") in which Seller owns 199,500 shares of
stock with a nominal value of 1 DM each (the "German Licensee Shares"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, on a going concern basis, substantially all the non-cash
assets and properties of Seller, and Buyer is willing to assume certain
liabilities in connection therewith, all on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, Seller, Buyer, General Partner and TFC hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE
-----------------
1.1. PURCHASED ASSETS. Upon the terms and subject to the
----------------
conditions of this Agreement, at the Closing (except for such of the following
as are to be Transferred, purchased and acquired at a time thereafter pursuant
to the terms hereof, in which case, at such time), Seller shall Transfer to
Buyer, and Buyer shall purchase and acquire from Seller, on a going concern
basis, free and clear of all Encumbrances (except for Permitted Encumbrances),
all of Seller's rights, title and interest in and to all the assets, properties,
interests, contracts and claims of every kind and description, wherever located,
owned, used or held by Seller, real, personal or mixed, tangible or intangible,
with such changes, deletions or additions thereto as may occur from the date of
this Agreement to the Closing and consistent with the terms and conditions of
this Agreement, including but not limited
<PAGE>
to Seller's rights, title and interest in and to the following, but in all cases
excluding any Excluded Assets ("Purchased Assets"):
(i) all accounts and notes receivable and other receivables;
(ii) all raw materials, supplies, work-in-process, finished
goods, goods on consignment and other materials;
(iii) all Governmental Permits, including without limitation the
Governmental Permits listed in Schedule 4.9(b);
(iv) all real property (including all buildings, improvements and
structures located thereon and all appurtenances thereto) and real property
interests (including without limitation all claims and rights of every kind
related to real property leases, options, contract rights, rights of way
and easements), including without limitation the properties and interests
identified in Schedule 4.11;
(v) all machinery, equipment, vehicles, furniture, leasehold
improvements and fixtures and other fixed assets and personal property,
including without limitation the fixed assets and personal property listed
or referred to in Schedule 4.13;
(vi) all intellectual property rights ("Proprietary Rights"),
including without limitation: (a) all United States and foreign patents and
patent applications, all United States and foreign copyrights and any
renewals, extensions and continuations thereof, United States, state, and
foreign trade names, trademarks and service marks, applications for
registrations of trademarks and service marks and trademark and service
mark registrations, including without limitation all trade names,
trademarks and service marks containing the words "Muzak", "Yesco" or
"Stimulus Progression" and all derivations thereof, as well as all
registered, assumed or fictitious names under which Seller is conducting
the Business or has conducted the Business ("Patent, Trademark and
Intellectual Property Rights"); (b) all software ("Software"), including
without limitation source code, software programs and all documentation and
materials relating thereto, whether patentable and/or copyrightable or not;
(c) all processes, concepts, discoveries, know-how, improvements or ideas
("Inventions"), whether patentable or not; (d) all useful information
relating to Inventions and/or Patent, Trademark and Intellectual Property
Rights ("Technical Information"), including know-how, technology,
engineering drawings,
2
<PAGE>
reports, design information, trade secrets, practices, laboratory
notebooks, specifications, test procedures and maintenance manuals; (e) all
patent, trademark and/or copyright licenses and/or other licenses to use
Patent, Trademark and Intellectual Property Rights, and/or Software and/or
Inventions and/or Technical Information of others ("Proprietary Rights
Licenses"); and (f) the Proprietary Rights listed in Schedule 4.15;
(vii) the Business as a going concern;
(viii) all phonograph record albums, phonograph records, compact
disks, master tapes and customer tapes;
(ix) all recordings and tape libraries;
(x) all claims and rights of every kind arising out of or
related to contracts, agreements, understandings, arrangements or
commitments of any kind, in all cases whether written or oral
(collectively, the "Contracts"), including without limitation joint venture
agreements, partnership agreements, leases (including real and personal
property leases), and licenses that allow Seller to program, arrange,
produce, reproduce and distribute to its licensees and dealers its music
programs, music video services, data messaging services, in-store
advertising services and video communications services in the manner now
carried out, as well as those that allow the performance of Seller's music
programs, music video services, data messaging services, in-store
advertising services and video communications services at the premises of
Seller's subscribers, including without limitation all Contracts listed or
described in Schedules 4.11, 4.14, 4.19(a), 4.19(b), 4.20(a), 4.20(b),
4.20(c), 4.20(d), 4.20(f) or 4.20(g)(i);
(xi) all mailing lists, customer lists, subscriber lists and
processes, including related procedures, files and manuals and all source
and object codes and documentation related thereto;
(xii) all rights, claims and causes of action against third
parties arising under warranties from vendors and other third parties in
connection with the Purchased Assets;
(xiii) all books and records (including all data and other
information stored on disks, tapes or other media);
(xiv) all prepaid charges, sums and fees, and all security and
similar deposits, in each case paid by or on behalf of Seller in connection
with Contracts, Proprietary Rights, Governmental Permits and other rights
sold to Buyer pursuant hereto;
3
<PAGE>
(xv) all letters of credit with respect to which Seller is a
beneficiary;
(xvi) all contracts and policies of insurance set forth in
Schedule 1.1(xvi), and all claims and rights thereunder;
(xvii) the German Licensee Shares;
(xviii) all confidentiality agreements covering confidential
information concerning the Business and all non-compete or similar
agreements in favor of Seller restricting activities competitive with those
of the Business;
(xix) all assets reflected on the Closing Date Balance Sheet (as
hereinafter defined);
(xx) all payments received under or in respect of the POP
Agreement in the ordinary course of business; and
(xxi) all other properties and assets owned or held by Seller,
whether or not of a type falling within any of the categories of assets or
properties described in Section 1.1 (i)-(xx).
1.2. EXCLUDED ASSETS. "Excluded Assets" means:
---------------
(i) all cash, cash equivalents, bank deposits and Marketable
Securities;
(ii) all assets reflected on the October Balance Sheet disposed
of or converted into cash after the October Balance Sheet Date in the ordinary
course of business;
(iii) the name "Field" or any related or similar trade names,
trademarks, service marks or logos containing, or referring to or based on, the
name "Field";
(iv) all contracts and policies of insurance, except those listed
in Schedule 1.1(xvi), and all claims and rights thereunder;
(v) all notes and accounts receivable of, and other evidence of
indebtedness to and rights to receive payment of, Seller owing to Seller from
any of its Affiliates (other than from any such Affiliate in its capacity as a
subscriber or similar customer of the Business or in its capacity as a Licensee
of the Business) not included on the October Balance Sheet;
(vi) all refunds, and rights to receive any refund, of any Tax
paid by Seller or its Affiliates or the Trusts for
4
<PAGE>
periods prior to the Closing Date;
(vii) the POP Sale Documents, all rights of Seller to receive
money under or in respect of any of the POP Sale Documents and all rights of
Seller to receive payment under the POP Agreement for the sale of the POP
Assets;
(viii) all minute books and income tax returns of Seller and its
Affiliates and the Trusts; and
(ix) all claims and rights of every kind arising out of or
related to the Contracts, or any other contractual or other rights, if the
liabilities and obligations arising or accruing thereunder are not to be assumed
by Buyer pursuant hereto.
1.3. ASSUMED LIABILITIES. Upon the terms and subject to the
-------------------
conditions of this Agreement, upon the Transfer of the Purchased Assets required
to be Transferred at the Closing, Buyer shall assume and agree to pay, perform
and discharge only the following liabilities and obligations of Seller (the
"Assumed Liabilities"):
(i) liabilities and obligations arising or accruing under the
Contracts (other than (x) those Contracts that are not Transferred at the
Closing, subject to the last sentence of Section 1.5, (y) any Contract that
should have been listed on Schedules 4.11, 4.14, 4.19(a), 4.19(b), 4.20(a),
4.20(b), 4.20(c), 4.20(d), 4.20(f) or 4.20(g)(i) but was not listed (except
to the extent that Buyer shall knowingly elect to accept performance
thereunder by any counterparty thereto, such acceptance to be deemed
effective as of the Closing Date) and (z) Contracts which are Excluded
Assets) with respect to events occurring on or after the Closing, and in
any case liabilities and obligations under the Non-Competition and
Confidentiality Agreement dated August 10, 1987 by and between Seller and
Melvin Bernstein;
(ii) liabilities and obligations of Seller as of the Closing Date
in the category referred to as Other Notes Payable on the October
Statement, and in any case the Torrance Note;
(iii) liabilities and obligations of Seller as of the Closing Date
in the category referred to as Capital Lease Obligations on the October
Statement;
(iv) liabilities and obligations of Seller as of the Closing Date
in the category referred to as Accounts Payable (other than A/R Refunds
Payable (0000-1999)) on the October Statement;
(v) liabilities and obligations of Seller as of the
5
<PAGE>
Closing Date in the category referred to as Business and P/R Taxes on the
October Statement;
(vi) liabilities and obligations of Seller as of the Closing Date
in the category referred to as Accrued License Fees on the October
Statement;
(vii) liabilities and obligations of Seller as of the Closing Date
in the category referred to as Other Accrued Liabilities (other than (1)
Payable to TFC (0000-2252); (2) Free Rent (0XXX-2270); (3) Presidents
Discretionary Accrual; (4) Sidley & Austin (0000-2270); and (5) Portion of
Acct for Interest Rate Cap (0110-2270)) on the October Statement;
(viii) liabilities and obligations of Seller as of the Closing Date
in the category referred to as Deferred Income on the October Statement;
and
(ix) all liabilities and obligations which accrue from and after
the Closing Date under the plans, agreements or arrangements referred to in
Section 7.4, other than any Multiemployer Plan, the Management Investment
Plan and any plan, agreement or arrangement listed in Schedule 4.18(g).
1.4. EXCLUDED LIABILITIES. Any liabilities and obligations,
--------------------
known and unknown, liquidated or unliquidated, contingent or fixed, of Seller
which are not among the Assumed Liabilities (collectively, the "Excluded
Liabilities"), whether or not disclosed in this Agreement or on any Schedule or
Exhibit hereto, shall remain the liabilities and obligations of Seller,
including but not limited to the following liabilities and obligations (it being
understood that Seller shall have no liability or obligation with respect to the
operation of the Business by Buyer from and after the Closing, except as may be
specifically stated herein):
(i) liabilities and obligations in the categories referred to on
the October Statement as (A) Accrued Interest; (B) Payable to TFC (0000-
2252); (C) Free Rent (0XXX-2270); (D) Presidents Discretionary Accrual; (E)
Sidley & Austin (0000-2270); (F) Portion of Acct for Interest Rate Cap
(0110-2270); and (G) Notes Payable Bank;
(ii) liabilities and obligations to pay any Taxes which are due
or shall become due: (x) as a result of the operations of the Business
(including the German Licensee), through and including the Closing Date
(other than those as of the Closing Date in the category referred to as
Business and P/R Taxes on the October Statement or any other category on
the October Statement which is explicitly set forth as an Assumed Liability
pursuant to Section 1.3), (y) by reason of the Transfers made at Closing,
including, without
6
<PAGE>
limitation, Taxes payable by Seller pursuant to Section 1.7 (but without
derogating Buyer's obligations under Section 1.7) or (z) by reason of any
amounts payable to Seller under or in respect of the POP Sale Documents
and/or the POP Agreement;
(iii) liabilities and obligations arising under Environmental Laws
as in effect prior to the Closing Date with respect to events occurring
prior to the Closing Date which were the immediate cause of such
liabilities and obligations;
(iv) liabilities and obligations relating to employees employed
in the Business arising out of events occurring prior to the Closing Date
except as stated in Section 1.3(v);
(v) liabilities and obligations which accrue as a result of the
rendering of services prior to the Closing Date arising out of any Plan (as
defined in Section 4.18(a)); and
(vi) liabilities and obligations arising out of the violation
prior to the Closing Date of any Governmental Rule.
1.5. TRANSFER OF PURCHASED ASSETS. Seller and Buyer shall comply
----------------------------
with Section 6.3 in obtaining all required approvals, consents or waivers in
respect of the Transfer of the Purchased Assets, including without limitation
the Contracts, the Proprietary Rights, the Governmental Permits and any other
right or asset. To the extent that any such required approval, consent or
waiver with respect to any Purchased Asset is not obtained prior to the Closing,
this Agreement shall not constitute a Transfer of such Purchased Asset, or an
attempted Transfer of such Purchased Asset, and Buyer and Seller, to the extent
commercially reasonable, will, on or before the Closing, enter into other
arrangements (which shall not, however, obligate Seller to make any payment to
effectuate any such arrangement except as provided in Section 6.3(c)) with
respect to any such Purchased Asset so that Buyer and Seller will be in
substantially the same economic position, including as to the assumption of
corresponding liabilities and obligations, as if such approval, consent or
waiver had been obtained and the Transfer effected on the Closing.
1.6. CONVEYANCE AND TRANSFER. Seller and Buyer agree that the
-----------------------
Transfer of the Purchased Assets will be effected by bills of sale,
endorsements, assignments and other instruments of transfer, all in such form as
Buyer reasonably requests, vesting in Buyer ownership of the Purchased Assets,
free and clear of all Encumbrances other than Permitted Encumbrances.
7
<PAGE>
1.7. SALES, TRANSFER AND RELATED TAXES AND CHARGES. Seller, on
---------------------------------------------
the one hand, and Buyer, on the other hand, shall each be responsible for one-
half (1/2) of the aggregate of all sales, use, gross receipts, transfer,
recordation, gains or other Taxes (including without limitation all applicable
foreign Taxes), together with any notarial fees or other charges, imposed on the
Transfer of the Purchased Assets. At the Closing (i) whichever party is
primarily responsible for such Taxes (or other charges) under applicable law
(the "Responsible Party") shall prepare and file the appropriate Tax Returns (or
other filings) relating to such Taxes (or other charges) based on the Buyer's
schedule of the tentative allocations prepared pursuant to Section 2.2(a), shall
deliver copies of such Tax Returns (or other filings) to the other party, and
shall notify in writing the other party (the "Notice Party") of its payment
obligations pursuant to this Section 1.7, and (ii) the Notice Party shall pay or
reimburse the Responsible Party for its share of any Taxes (or other charges)
due with respect to such Tax Returns (or other filings). In the event the amount
of such Taxes (or other charges) increases as a result of an adjustment to the
Purchase Price hereunder, or as a result of a determination of a Governmental
Body, then (i) the Responsible Party shall prepare and timely file the
appropriate Tax Returns (or other filings) relating to such additional Taxes (or
other charges), shall deliver copies of such Tax Returns to the Notice Party and
shall notify in writing the Notice Party of its payment obligations pursuant to
this Section 1.7, and (ii) the Notice Party shall timely pay or reimburse the
Responsible Party for its share of any such additional Taxes (or other charges).
Notwithstanding the foregoing, if, under the laws of a particular jurisdiction,
the Responsible Party is not able to transfer to the Notice Party the burden of
its share of any such Taxes (or other charges), then the Notice Party shall pay
a greater share of any such Taxes (or other charges) payable to a jurisdiction
that permits (or requires) such Taxes (or other charges) to be borne by the
Notice Party or shall take such other actions as may be reasonably requested by
the Responsible Party to effectuate the division of the costs of any such Taxes
(or other charges) in accordance with the first sentence of this Section 1.7.
The Seller, on the one hand, and the Buyer, on the other hand, also agree that
each shall share one-half of all refunds of any such Taxes (or other charges).
With respect to any such Taxes requiring filing of questionnaires, affidavits or
other information or documents in addition to or in lieu of any Tax Return
(including without limitation Article 31-B of the New York Tax Law with respect
to assignment of leases of real property), Seller and Buyer agree to comply in a
timely manner with all requirements for such filings prior to and subsequent to
the Closing.
1.8. PRORATION. Ad valorem, property and other similar Taxes due
---------
with respect to the Purchased Assets for any
8
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The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
taxable year (or period) beginning before the Closing Date and ending after the
Closing Date shall be pro-rated as of the Closing Date; provided, however, that
-------- -------
if and to the extent that such Taxes are reflected in the liabilities on the
Closing Date Balance Sheet, such Taxes shall be paid by Buyer.
ARTICLE II
PURCHASE PRICE
--------------
2.1. PURCHASE PRICE. The aggregate purchase price for the
--------------
Purchased Assets (the "Purchase Price") shall be (i) $54,950,000, plus (ii) the
----
[**] referred to in the Amended Partnership Agreement (the [**], which defined
term shall include, where applicable, preferred stock of a corporation issued
pursuant to Section 3.03 or 16.01, or any successor provision, of the Amended
Partnership Agreement). The terms and conditions of the [**] are set forth in
the Amended Partnership Agreement. Any payment to which Buyer shall be entitled
pursuant to Article X may at Buyer's option be setoff (x) against any amounts
distributable in respect of the [**] and/or (y) against the amount of any [**],
in each case (x) and (y), pursuant to the Setoff Procedure. The Purchase Price
shall be payable as provided in Section 2.4, shall be allocated among the Assets
as provided in Section 2.2 and shall be adjusted as provided in this Agreement.
2.2. ALLOCATION OF PURCHASE PRICE. (a) The Purchase Price
----------------------------
(together with the amount of the Assumed Liabilities) shall be allocated by
Buyer among the Purchased Assets consistent with the appraisals and valuations
of the Purchased Assets prepared by Arthur Andersen & Co. (collectively, the
"Appraisal"). The amounts set forth in the Appraisal will represent the agreed
upon values of the Purchased Assets. Buyer shall provide Seller with a schedule
of such tentative allocations based on the Appraisal and consistent with the
principles of Section 1060 of the Code at least five days prior to the Closing
Date. It is understood that the amounts of such asset values are likely to
change between the date the schedule is delivered and the determination of the
adjustment to the Purchase Price as provided in Section 2.3. The schedule of
allocations provided by Buyer shall be adjusted accordingly. Buyer shall
provide such revised schedule of allocations to Seller within thirty (30) days
after such determination, and, unless and until the Purchase Price is increased
as a result of the Earn-Out Payment (as hereinafter defined), such revised
schedule shall be final and binding on all the parties, absent manifest error.
Subject to the provisions of Section 2.2(b), such revised allocation schedule
shall be used by the parties in
9
<PAGE>
preparing and filing all relevant Tax Returns, and the parties agree to
cooperate with each other in good faith in preparing any such Tax Returns,
including IRS Form 8594 and any required exhibits thereto (or other forms
required pursuant to Section 1060 of the Code, or other applicable tax laws);
provided, however, that in determining the adjusted basis of Buyer with respect
- -------- -------
to any of the Purchased Assets, Buyer may increase the amount allocated to any
of the Purchased Assets to the extent permissible under applicable tax laws for
Buyer's additional costs and expenses that are neither actually received nor
treated as received by Seller pursuant to such tax laws. The costs of obtaining
the Appraisal shall be borne by Buyer.
(b) When determined, the amount of the Earn-Out Payment, if any,
reduced by the portion thereof representing imputed interest, shall be added to
the Purchase Price, and such recomputed Purchase Price shall be allocated by
Buyer among the Purchased Assets by recomputing the allocations previously
determined pursuant to Section 2.2(a). Buyer shall provide the Seller with a
schedule of such revised allocations as soon as practicable after the amount of
the Earn-Out Payment, if any, is determined, and such revised schedule shall be
final and binding on all the parties. The parties agree to prepare and file all
relevant Tax Returns, including an amended IRS Form 8594 and any required
exhibits thereto (or other forms required pursuant to Section 1060 of the Code,
or other applicable tax laws), consistent with such revised schedule.
2.3. PURCHASE PRICE ADJUSTMENT. (a) The cash portion of the
-------------------------
Purchase Price will be adjusted as soon as practicable following the Closing in
accordance with this Section 2.3.
(b) As soon as practicable (but in no event later than sixty
(60) days after the Closing Date) Buyer shall prepare a statement of the assets
and liabilities of Seller included on the October Statement as of the Closing
Date (the "Closing Date Balance Sheet") applying the same accounting principles,
practices, methods and adjustments, except as set forth in Schedule 2.3(b),
which were applied in the preparation of the October Statement; provided, that,
-------- ----
any Excluded Liabilities shall not be reflected as liabilities on the Closing
Date Balance Sheet.
(c) If the Net Assets (as reflected on the Closing Date Balance
Sheet) (the "Net Assets") are less than $2,865,000, the Purchase Price shall be
reduced to the extent of the difference between $2,865,000 and the Net Assets.
If the Net Assets are more than $2,865,000, the Purchase Price shall be
increased to the extent of the difference between the Net Assets and $2,865,000.
If Seller is unable to Transfer all the German Licensee Shares to Buyer at the
Closing because the restrictions
10
<PAGE>
prohibiting the Transfer of the German Licensee Shares have not been removed
prior to the Closing, (i) the Purchase Price shall be reduced by $720,000 and
(ii) if and to the extent that the German Licensee Shares were included as Net
Assets on the October Statement, they shall be deemed to be excluded from the
October Statement for purposes of calculating Net Assets.
(d) The term "Net Capital Expenditures" shall mean the amount,
if any, by which (x) aggregate capital expenditures of Seller (determined on a
basis consistent with Seller's previous financial statements) from November 1,
1991 to the Closing Date exceed (y) aggregate net proceeds realized by Seller
from any Transfer of property, plant and equipment of Seller (other than the
aggregate proceeds realized by Seller from any sales of equipment pursuant to
the POP Agreement) from the period from November 1, 1991 to the Closing Date.
The term "Projected Capital Expenditures" (which does not actually constitute or
refer to a projection made by Seller) shall mean an amount equal to $376,000 per
month from the period from November 1, 1991 to the Closing Date. For purposes of
calculating Projected Capital Expenditures, if the Closing Date occurs on a date
other than the last day of any month, it shall be assumed that Net Capital
Expenditures for such month shall equal the product of (i) $376,000 and (ii) a
fraction, the numerator of which is the number of days which have expired in the
month during which the Closing occurs, through and including the Closing Date,
and the denominator of which is the number of days in the month during which the
Closing occurs. If the Net Capital Expenditures are less than the Projected
Capital Expenditures, the Purchase Price shall be reduced to the extent of such
difference. If the Net Capital Expenditures are more than the Projected Capital
Expenditures, the Purchase Price shall be increased to the extent of such
difference.
(e) As soon as practicable (but not later than sixty (60) days)
after the Closing Date, Buyer will deliver to Seller and Seller's accountants
and attorneys the Closing Date Balance Sheet and calculation of the adjustments
to the Purchase Price in accordance with Sections 2.3(c) and 2.3(d)
(collectively, the "Adjustment"). Buyer shall provide Seller and Seller's
accountants and attorneys with copies of all work papers, documents, receipts,
invoices and other materials and access to Buyer's personnel during regular
business hours as may be necessary or reasonably requested by Seller in its
review of the Closing Date Balance Sheet and the Adjustment. If Seller does not
timely deliver a "Contest Notice" (as hereinafter defined) in accordance with
Section 2.3(f), the Closing Date Balance Sheet and the Adjustment will be final
and binding on all the parties, absent manifest error.
(f) In the event that Seller contests any part of the revised
Purchase Price, if any, and the Adjustment, if any,
11
<PAGE>
as set forth above, Seller shall give written notice of its objections thereto
(a "Contest Notice") within thirty (30) business days following the delivery of
the Closing Date Balance Sheet and the Adjustment. Any such Contest Notice shall
specify in reasonable detail the nature of any disagreement asserted and the
amount claimed by Seller.
(g) During the period of thirty (30) business days following the
timely delivery of any such Contest Notice, Buyer and Seller shall attempt to
resolve any differences which Buyer and Seller may have with respect to any
matter specified in the Contest Notice (which resolution, if any, shall be final
and binding on all the parties, absent manifest error). If, at the end of such
thirty (30) business day period, Buyer and Seller shall fail to reach written
agreement with respect to all of such matters, then all such matters specified
in any Contest Notice with respect to which such written agreement has not been
reached (the "Disputed Matters"), shall be submitted to an independent certified
public accounting firm selected by Buyer ("Buyer's Accountant") and an
independent certified public accounting firm selected by Seller ("Seller's
Accountant") who shall attempt to resolve the Disputed Matters within the
immediately succeeding thirty (30) business day period (which resolution, if
any, shall be final and binding on all the parties). If Buyer's Accountant and
Seller's Accountant shall fail to reach written agreement with respect to the
Disputed Matters within such thirty (30) business day period, the Disputed
Matters shall be submitted to and arbitrated by a third independent certified
public accounting firm (the "Arbitrator") selected by Buyer's Accountant and
Seller's Accountant, respectively. The Arbitrator shall consider only the
Disputed Matters. The Arbitrator shall act promptly, and the Arbitrator's
decision with respect to all Disputed Matters shall be final and binding upon
the parties hereto.
(h) Buyer shall pay the fees and expenses of Buyer's Accountant,
and Seller shall pay the fees and expenses of Seller's Accountant. The fees and
expenses of the Arbitrator incurred in connection with its review and
determination of any Disputed Matters shall be borne one-half (1/2) by Buyer and
one-half (1/2) by Seller.
2.4. CALCULATION OF CLOSING PAYMENT AND PAYMENT OF PURCHASE
------------------------------------------------------
PRICE. (a) No more than five (5) business days prior to the Closing Date,
- -----
Seller, in consultation with the senior management of Seller, shall prepare an
estimated unaudited statement of the assets and liabilities of Seller included
on the October Statement as of the Closing Date (the "Estimated Balance Sheet")
applying the same accounting principles, practices, methods and adjustments,
except as set forth in Schedule 2.3(b), which were applied in the preparation of
the October Statement; provided, that, any Excluded Liabilities shall not be
-------- ----
reflected as liabilities on the Estimated Balance Sheet.
12
<PAGE>
(b) At the Closing, Buyer shall pay to Seller, by wire transfer
of immediately available funds to an account to be designated in writing by
Seller at least five (5) business days prior to the Closing Date, an amount (the
"Closing Payment") equal to $54,950,000 as increased or decreased by the amount,
if any, of the Estimated Balance Sheet Adjustment (as hereinafter defined). The
"Estimated Balance Sheet Adjustment" shall be calculated based on the same
principles as the calculation of the Adjustment (as to Net Assets and as to
capital expenditures of Seller pursuant to Sections 2.3(c) and 2.3(d)), except
that (i) with regard to the calculation of Net Assets, all balance sheet
references shall be to the Estimated Balance Sheet and (ii) with regard to the
calculations of Net Capital Expenditures and Projected Capital Expenditures all
references to the Closing or the Closing Date shall be to the date of the
Estimated Balance Sheet. In addition, the Closing Payment shall be decreased by
$720,000 if Seller is unable to Transfer the German Licensee Shares to Buyer at
the Closing.
(c) If the cash portion of the Purchase Price as adjusted
pursuant to Section 2.3 exceeds the Closing Payment, then Buyer shall pay to
Seller the amount of such excess, together with interest thereon from and
including the Closing Date to but excluding the date of payment at the prime
rate, by wire transfer of immediately available funds within two business days
of (i) the last day for Seller to deliver a Contest Notice, if no such Contest
Notice is delivered, or (ii) the date of the Arbitrator's determination with
respect to the Disputed Matters, the date on which Buyer's Accountant and
Seller's Accountant mutually resolve the Disputed Matters or the date on which
Buyer and Seller mutually resolve any differences contained in a Contest Notice,
as the case may be, if a Contest Notice is delivered by Seller. Such prime rate
shall be the prime rate reported (or, if more than one rate is reported, the
mean of those reported) under "Money Rates" in The Wall Street Journal or, if
-----------------------
not then so reported, as reported in another published source agreeable to Buyer
and Seller, on the business day preceding each relevant calculation date, and
interest shall be calculated on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be.
(d) If the Closing Payment shall have exceeded the cash portion
of the Purchase Price as adjusted pursuant to Section 2.3, then Seller shall pay
to Buyer the amount of such excess, together with interest thereon from and
including the Closing Date to but excluding the date of payment at the prime
rate (determined as provided in Section 2.4(c)), by wire transfer within two
business days of (i) the last day for Seller to deliver a Contest Notice, if no
such Contest Notice is delivered, or (ii) the date of the Arbitrator's
determination with respect to the Disputed Matters, the date on which Buyer's
Accountant and
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<PAGE>
Seller's Accountant mutually resolve the Disputed Matters or the date on which
Buyer and Seller mutually resolve any differences contained in a Contest Notice,
as the case may be, if a Contest Notice is delivered by Seller.
2.5. EARN-OUT. (a) If (x) cumulative "EBITDA" (as hereinafter
--------
defined) for the period (the "Base Period") commencing on the Closing Date and
ending on the fifth anniversary of the Closing Date (the "Determination Date")
is equal to or greater than the aggregate amount set forth in column I of
Schedule 2.5(a) or (y) on the occurrence of a Transfer Event (also, a
"Determination Date"), cumulative EBITDA is "On Plan" (as hereinafter defined),
Buyer shall make a payment to Seller (the "Earn-Out Payment") in an amount equal
to the sum (the "Sum") of (A) $6,670,000, plus (B) an amount equal to the
----
product of (1) $13,330,000 and (2) a fraction, the numerator of which shall be
the amount, if any, by which cumulative EBITDA for the period from the Closing
Date until the Determination Date exceeds the aggregate amounts in column I of
Schedule 2.5(a) for such period, and the denominator of which shall be the
difference between the aggregate amounts in column I and column II of Schedule
2.5(a) for the period from the Closing Date until the Determination Date, which
Sum shall be discounted at the rate of 25% per annum for the number of months
(including the month of the Determination Date) then remaining in the Base
Period; provided, that, the Earn-Out Payment shall in no event exceed
-------- ----
$20,000,000.
(b) The Earn-Out Payment shall be made on the date set forth in
Section 2.5(f)(vi); provided, however, that at the option of Buyer, the Earn-Out
-------- -------
Payment may be paid in whole or in part by delivery of one or more subordinated
notes, substantially in the form of Exhibit A (the "Earn-Out Notes"), all such
notes in the aggregate having a total original principal amount equal to the
amount of the Earn-Out Payment.
(c) For purposes of this Section 2.5:
(1) "EBITDA" shall mean, with respect to any period, the following,
which shall be determined in accordance with GAAP (including accounting
methods and practices) as applied by Seller as of the Closing Date:
Buyer's earnings before interest, income taxes, depreciation and
amortization, plus:
----
(x) the sum of:
(i) the fees referred to in Section 2.5(d)(ii)(x) and any
other management or other fees paid, directly or indirectly, by Buyer to any
Affiliate of Buyer during such period (to the extent deducted from earnings);
14
<PAGE>
(ii) any accrued long-term management incentive
compensation expenses (to the extent deducted from earnings);
(iii) any losses on extraordinary asset sales (to the
extent such losses were deducted from earnings); and
(iv) an amount (the "Operating Lease Adjustment") that
shall be added only if (I) through the month prior to any Determination Date
Buyer shall have made cumulative average capital expenditures of less than
$366,667 per month and (II) Buyer shall have utilized operating leases and
incurred operating lease expenses with respect to assets not financed with
operating leases by Seller under Seller's accounting practices prior to Closing,
in which case the Operating Lease Adjustment shall equal the actual amount of
such operating lease expenses for each month from the Closing Date through the
Determination Date; provided, however, that the Operating Lease Adjustment shall
-------- -------
not exceed an amount equal to the product of (A) the absolute value of the
difference between (x) cumulative actual capital expenditures from the month
following the Closing Date through and including the month of the Determination
Date and (y) the product of $366,667 multiplied by the number of months from the
month following the Closing Date through and including the month of the
Determination Date and (B) the "Weighted Average Annual Lease Rate" divided by
twelve multiplied by the number of months from the month following the Closing
Date through and including the month of the Determination Date (for this
purpose, the "Weighted Average Annual Lease Rate" shall be calculated by Buyer's
independent certified public accountants and shall be equal to the weighted
average of all individual operating lease payments divided by the original cost
of assets underlying each individual operating lease); and provided further,
-------- -------
however, that, if Buyer shall adopt any incentive plan for management employees
- -------
of Buyer to own or purchase any interests in Buyer or to receive any incentive,
performance-based, equity-linked or similar payments, or shall amend any
existing such plan (including the plan for management employees attached in
Schedule 5.5), which incentivizes performance based in whole or in part on
EBITDA-type calculations, and such plan as so adopted or amended shall provide
terms thereunder more favorable to the beneficiaries of such plan with respect
to add back-type provisions in respect of the treatment of operating leases for
purposes of such EBITDA-type calculations than those provided to Seller in the
foregoing Operating Lease Adjustment (as previously amended, if applicable),
then the foregoing Operating Lease Adjustment (as previously amended, if
applicable) shall be amended to provide for such more favorable terms, mutatis
-------
mutandis, effective as of the effective date of such terms; less
- -------- ----
(y) any gain on extraordinary asset sales (to the extent such gains
were included in earnings);
15
<PAGE>
(2) the amount of any cash bonus payments to members of senior
management of the Business which are unreasonable and significantly in
excess (but only to the extent of such excess) of such amount that would be
consistent with past practice of the Business prior to the Closing (after
giving effect to the actual operating results of Buyer), shall not be
deducted in calculating EBITDA;
(3) cumulative EBITDA shall be deemed to be "On Plan" at any date if
cumulative EBITDA as of such date shall equal or exceed the aggregate
amounts set forth in column I of Schedule 2.5(a) for the period from the
Closing Date to the end of the month prior to such date; and
(4) EBITDA shall be further increased or decreased by the positive or
negative EBITDA of any EBITDA Contributor, as the case may be, but only to
the extent of Buyer's pro rata share of the EBITDA of such EBITDA
Contributor calculated based on the application of the equity method of
accounting to Buyer's percentage equity interest in such EBITDA
Contributor, without giving effect to any factor, including level of
ownership and/or voting power, that would otherwise preclude the
application of the equity method of accounting; if Buyer or any Subsidiary
acquires any equity interest in an EBITDA Contributor with respect to which
Buyer is not able to make the foregoing determination, the EBITDA
attributable to such EBITDA Contributor shall be determined on a basis
consistent with the foregoing, to the extent practicable, and otherwise as
determined reasonably and in good faith by Buyer.
(d) Between the Closing Date and the earlier of (i) the
expiration of the Base Period or (ii) the occurrence of a Transfer Event, and,
in the case of paragraph (v) below, at all times until the Earn-Out Payment is
made unless following the Determination Date the Earn-Out Payment shall not be
------
payable in accordance with the terms of this Agreement:
(i) Buyer shall not, and shall not permit any Subsidiary to,
Transfer any of its assets, other than in the ordinary course of business,
for aggregate consideration having a value of less than the then fair
market value of the assets Transferred.
(ii) Buyer shall not, and shall not permit any Subsidiary to,
enter into any transaction with any Affiliate of Buyer unless Buyer or such
Subsidiary would have entered into such transaction with a Person not an
Affiliate of Buyer and the terms thereof are at least as favorable to Buyer
or such
16
<PAGE>
Subsidiary as those that Buyer or such Subsidiary would have obtained in a
transaction on an arm's-length basis with a Person not an Affiliate of
Buyer, except that the foregoing shall not restrict the ability of Buyer to
(w) adopt and comply with the management bonus plan and/or the Management
Option Plan (as defined in the Amended Partnership Agreement), the terms of
which are set forth in Schedule 5.5, (x) reimburse the Administrative
General Partner (as defined in the Amended Partnership Agreement) of Buyer
and MLP Acquisition (or its successor as managing general partner of Buyer)
for reasonable out-of-pocket expenses and MLP Acquisition (or its successor
as managing general partner of Buyer) for directors' fees paid to the
members of the board of directors of its managing general partner,
provided, that, such payments for directors' fees shall not exceed $100,000
-------- ----
annually in the aggregate (subject to reasonable cost of living adjustments
based on published sources and not to exceed 5% per annum), (y) enter into
and comply with any employment agreements with members of Buyer's
management or (z) pay a non-recurring fee of $600,000 to CCI in connection
with the consummation of the transactions contemplated by this Agreement.
(iii) Buyer and the Subsidiaries collectively shall continue to
engage in the business of the same general type as the Business.
(iv) Buyer shall give Seller notice of a Transfer Event and any
Significant Asset Sale (as hereinafter defined) or any Significant Asset
Purchase (as hereinafter defined) ("Event") upon the earlier of (x)
entering into a binding agreement providing for such Event or (y) the
giving of notice of such Event to the limited partners of Buyer; provided,
--------
that, such notice to Seller shall not in any event be given less than ten
----
(10) days prior to such Event.
(v) Buyer shall not, and shall not permit any Subsidiary to,
directly or indirectly, make any distribution of cash, securities or other
assets in respect of, or purchase or retire, any equity interests in Buyer
or options or warrants to purchase such interests, in each case outstanding
on the Closing Date (or equity interests, options or warrants issued in
respect of or upon Transfer of equity interests, options or warrants
outstanding on the Closing Date), except (x) in connection with the
termination of employment of an employee of Buyer, the repurchase of such
employee's equity interest and options under the Management Option Plan in
Buyer, provided, that, if Buyer is then in default with respect to the
-------- ----
payment of the Earn-Out Payment or the Earn-Out Notes for any reason,
whether voluntary or involuntary (including without limitation by reason of
a prohibition arising out of a default or an event of default in a
financing agreement), Buyer may only effect
17
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
such repurchase by delivering to such employees Permitted Securities (as
defined below) and (y) cash distributions (but only for such periods as
Buyer exists in the form of a partnership) to the holders of equity
interests in Buyer in an amount equal to the lower of (A) the product of
(i) the taxable income of Buyer for any fiscal year for which Buyer reports
taxable income for Federal income tax purposes determined as if Buyer were
a separately taxable entity and (ii) a percentage equal to the sum of (1)
the highest marginal Federal income tax rate applicable to individuals in
effect for such year and (2) ten percentage points or (B) the maximum
amount of distributions for taxes Buyer is permitted to make under the
agreements entered into pursuant to the commitments for senior debt
financing set forth in Schedule 5.5 or any refinancing thereof, provided,
--------
that, if Buyer is then in default with respect to the payment of
----
any of the Earn-Out Payment, the Earn-Out Notes, [**], for any reason,
whether voluntary or involuntary (including without limitation by reason of
a prohibition arising out of a default or an event of default in a
financing agreement), Buyer may not make the cash distributions described
in this clause (y). For purposes of the preceding sentence, Buyer shall not
be prohibited from delivering (x) securities issued or issuable to
employees pursuant to the Management Option Plan, (y) unless Buyer is then
in default with respect to the payment of the Earn-Out Payment or the Earn-
Out Notes, cash payments in connection with the cash settlement of such
securities pursuant to the Management Option Plan; provided, that, if there
-------- ----
is in effect any such payment default, Buyer may effect such cash
settlement only by delivering to such employees Permitted Securities,
and/or (z) securities issued or issuable pursuant to the exercise of
warrants or options issued to the holders of the debt financing referred to
in Section 5.5 in accordance with their terms or any refinancing thereof.
"Permitted Securities" means (i) with respect to such a default under any
[**], notes of Buyer having a ranking chosen by Buyer (which ranking shall
be senior to the [**]) and (ii) with respect to such a default under the
Earn-Out Payment or the Earn-Out Notes, notes of Buyer pari passu with the
Earn-Out Notes (whether or not then issued) in terms of ranking and
restrictions on terms of payment.
(vi) Buyer shall provide to Seller (x) as soon as available after
the end of the first three quarters of each fiscal year of Buyer the
unaudited quarterly financial statements of Buyer for such fiscal quarter,
(y) as soon as available after the end of each fiscal year of Buyer, the
audited annual financial statements of Buyer for such fiscal year and (z)
any notice of an occurrence of an event of
18
<PAGE>
default (or of an event that, with notice or lapse of time or both would
constitute an event of default) received by Buyer from its lenders or
delivered to such lenders by Buyer and any amendments to the financing
documents among Buyer and its lenders. If Buyer has any consolidated
subsidiaries, the financial statements referred to in clauses (x) and (y)
shall be consolidated and consolidating financial statements; in any case,
such financial statements shall be prepared in accordance with GAAP on a
consistent basis and shall fairly present the financial condition, results
of operation and cash flows of Buyer for the dates and periods covered
thereby, subject, in the case of interim financial statements, to normal
year-end adjustments and to the absence of footnotes.
(vii) Buyer (x) shall not permit any member of its operating
management to be employed by Centre Partners or CCI, directly or
indirectly, other than through employment by Buyer and (y) shall require
that each member of its operating management devote substantially all of
his or her business time to the Business.
(e)(i) In the event that, during the Base Period and prior to the
time of a Transfer Event, Buyer or any Subsidiary Transfers or acquires, in one
transaction or a related series of transactions (other than in the ordinary
course of business), any business segment or any asset or related group of
assets ("Significant Assets") that if Transferred or acquired with associated
goodwill and other intangibles would constitute a business segment (a
"Significant Asset Sale" or a "Significant Asset Purchase", as the case may be),
the amounts set forth in columns I and II of Schedule 2.5(a) shall be adjusted
as follows:
(A) In the event of a Significant Asset Sale, the amounts set
forth in columns I and II of Schedule 2.5(a) for each month after the month
in which the Significant Asset Sale occurs shall be adjusted by multiplying
each such amount by a fraction (x) the numerator of which is EBITDA for the
twelve month period preceding the month in which the Significant Asset Sale
occurs, less the EBITDA attributable to the applicable Significant Assets
----
Transferred for the twelve month period preceding the month in which the
Significant Asset Sale occurs and (y) the denominator of which is EBITDA
for the twelve month period preceding the month of the Significant Asset
Sale, all as determined reasonably and in good faith by Buyer.
(B) In the event of a Significant Asset Purchase, the amounts
set forth in columns I and II of Schedule 2.5(a) for each month after the
month in which the Significant Asset Purchase occurs shall be adjusted by
multiplying each such amount by a fraction (x) the numerator of which is
19
<PAGE>
EBITDA for the twelve month period preceding the month in which the
Significant Asset Purchase occurs, plus the estimated EBITDA
----
which would have been attributable to the applicable Significant Assets
acquired for the twelve months preceding the month in which the Significant
Asset Purchase occurs and (y) the denominator of which is EBITDA for the
twelve month period preceding the month in which the Significant Asset
Purchase occurs, all as determined reasonably and in good faith by Buyer.
(C) Without limiting the generality of the foregoing, (i) a
Significant Asset Sale shall be deemed to occur upon (x) the Transfer of
Significant Assets to a Person that is an EBITDA Contributor immediately
after such Transfer and/or (y) the Transfer of an equity interest in an
EBITDA Contributor, (ii) a Significant Asset Purchase shall be deemed to
occur upon the acquisition of an equity interest in a Person that is an
EBITDA Contributor immediately after such acquisition and (iii) a single
transaction which involves both a deemed Significant Asset Sale and a
deemed Significant Asset Purchase shall be treated as involving separate
transactions. In any such case, the calculations relating to any
transaction contemplated by this Section 2.5(e)(i) shall appropriately
reflect any changes in the equity interest owned by Buyer or a Subsidiary
in an EBITDA Contributor during the applicable twelve (12) month measuring
period.
(ii) Buyer shall give Seller notice of its determination of
EBITDA attributable to the Significant Assets involved in a Significant Asset
Sale or a Significant Asset Purchase at least five (5) business days prior to
such Event. Such notice shall include sufficient information as may be
reasonably necessary for Seller to review the determination of Buyer of EBITDA
attributable to such Significant Assets. Within thirty (30) days of the receipt
of such notice, Seller must give Buyer notice of any objection to such
determination. If a timely notice is given by Seller to Buyer, Seller may
include such objection as part of an Earn-Out Contest Notice (as hereinafter
defined) in connection with the procedure set forth in Section 2.5(f). If
Buyer's notice complied with the standard set forth in the second sentence of
this Section 2.5(e)(ii) and Seller fails to timely give Buyer such notice of
objection, Seller shall be precluded from including such an objection as part of
an Earn-Out Contest Notice.
(f)(i) As soon as practicable after a Determination Date (but in no
event later than forty-five (45) days after a Determination Date) Buyer shall
prepare and deliver to Seller a certificate of Buyer stating cumulative EBITDA
from the Closing Date until such date, including any adjustments to the amounts
set forth in columns I and II of Schedule 2.5(a), if any,
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pursuant to Sections 2.5(e)(i)(A), (B) and (C), and the amount of the Earn-Out
Payment, each as set forth therein, have been determined in accordance herewith
(the "Earn-Out Certificate").
(ii) Buyer shall provide Seller with copies of all work papers,
documents, receipts, invoices and other materials and access to Buyer's
personnel during regular business hours as may be necessary or reasonably
requested by Seller in its review of the Earn-Out Certificate. If Seller
does not timely deliver an Earn-Out Contest Notice (as hereinafter defined)
in accordance with clause (iii) below, the Earn-Out Certificate will be
final and binding on all the parties.
(iii) In the event that Seller contests any part of the
calculation of cumulative EBITDA, including any objection as to the
determination of the adjustments to the amounts set forth in columns I and
II of Schedule 2.5(a), if any, pursuant to Sections 2.5(e)(i)(A), (B) and
(C), and/or the amount of the Earn-Out Payment each as set forth in the
Earn-Out Certificate, Seller shall give written notice of its objections
thereto (an "Earn-Out Contest Notice") within thirty (30) days following
the delivery of the Earn-Out Certificate.
(iv) During the period of thirty (30) days following the timely
delivery of any such Earn-Out Contest Notice, Buyer and Seller shall
attempt to resolve in writing any differences which Buyer and Seller may
have with respect to any matter specified in the Earn-Out Contest Notice
(which resolution, if any, shall be final and binding on all the parties).
If at the end of such thirty (30) day period, Buyer and Seller shall fail
to reach written agreement with respect to all of such matters, then all
such matters specified in any Earn-Out Contest Notice with respect to which
such written agreement has not been reached (the "Earn-Out Disputed
Matters") shall be submitted to and arbitrated by an investment bank of
recognized standing with substantial experience in the media business (the
"Earn-Out Arbitrator") selected by an investment bank selected by Buyer and
an investment bank selected by Seller. The Earn-Out Arbitrator shall
consider only the Earn-Out Disputed Matters. The Earn-Out Arbitrator shall
act promptly, and the Earn-Out Arbitrator's decision with respect to all
Earn-Out Disputed Matters shall be final and binding upon the parties
hereto.
(v) The fees and expenses of the Earn-Out Arbitrator incurred in
connection with its review and determination of the Earn-Out Disputed
Matters shall be borne one-half (1/2) by Buyer and one-half (1/2) by
Seller.
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(vi) Buyer shall pay to Seller the Earn-Out Payment plus interest
----
on the amount of the Earn-Out Payment from the Determination Date to the
date of the payment of the Earn-Out Payment (determined as provided in
Section 2.4(c)) within ten (10) days of (x) the last day for Seller to
deliver an Earn-Out Contest Notice, if no such Earn-Out Contest Notice is
delivered, or (y) the date of the determination of the Earn-Out Disputed
Matters by the Earn-Out Arbitrator or the date that Buyer and Seller
mutually resolve the differences set forth in the Earn-Out Contest Notice,
as the case may be, if an Earn-Out Contest Notice is delivered by Seller.
(g) Any payment to which Buyer shall be entitled pursuant to
Article X may at Buyer's option be setoff against the amount of any Earn-Out
Payment in accordance with the Setoff Procedure.
ARTICLE III
CLOSING
-------
3.1. CLOSING DATE. The Closing shall be consummated at 10:00
------------
A.M., local time, on the last business day of the month during which all the
conditions to each party's obligation to Close have been satisfied or waived, at
the offices of Rosenman & Colin, 575 Madison Avenue, New York, New York 10022 or
at such other place or time as shall be agreed upon by the parties hereto. The
time and date on which the Closing is actually held is referred to herein as the
"Closing Date".
3.2. SELLER'S CLOSING DELIVERIES. Subject to fulfillment or
---------------------------
waiver of the conditions set forth in Article IX, at the Closing, Seller shall
deliver, or caused to be delivered, to Buyer all the following:
(a) copies of Seller's certificate of limited partnership
certified as of a recent date by the Secretary of State of Delaware;
(b) certified copies of the resolutions of the General Partner's
board of directors and sole stockholder, together with any required approvals of
the Limited Partner, in connection with the transactions contemplated hereby;
(c) certified copies of the resolutions of TFC's board of
directors in connection with the transactions contemplated hereby;
(d) certificates of legal existence, good standing and tax good
standing of Seller and the General Partner issued as of a recent date by the
Secretary of State of the State of
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Delaware and certificates of good standing and tax good standing of each
jurisdiction in which Seller and/or the General Partner is qualified to transact
business; and a certificate of legal existence, good standing and tax good
standing of TFC issued as of a recent date by the Secretary of State of the
State of Delaware;
(e) incumbency and specimen signature certificates dated the
Closing Date with respect to the officers of the General Partner executing this
Agreement and any Seller Ancillary Agreement on behalf of itself and on behalf
of Seller;
(f) incumbency and specimen signature certificates dated the
Closing Date with respect to the officers of TFC executing this Agreement;
(g) opinions of counsel to Seller and TFC referred to in Section
8.13;
(h) Instruments of Assignment duly executed by Seller;
(i) to the extent then deliverable, certificates of title or
origin (or like documents) with respect to any vehicles or other equipment
included in the Purchased Assets for which a certificate of title or origin is
required in order to transfer title;
(j) all consents, waivers or approvals, including those relating
to the Proprietary Rights, the Contracts and the Governmental Permits obtained
by Seller with respect to the Transfer of the Purchased Assets or the
consummation of the transactions contemplated hereby;
(k) the certificates contemplated by Sections 8.1 and 8.2;
(l) subject to the terms of this Agreement, such other bills of
sale, assignments and other instruments of Transfer as Buyer may reasonably
request or as may be otherwise necessary to evidence and effect the Transfer of
the Purchased Assets to Buyer;
(m) each other document then required to be delivered by Seller
pursuant to Article VII or VIII;
(n) the Non-Competition Agreement duly executed by Seller,
General Partner, TFC, Marshall Field V and the Trusts;
(o) the Intellectual Property Assignment (as hereinafter
defined);
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<PAGE>
(p) the Amended Partnership Agreement executed by Seller;
(q) the affidavit referred to in Section 7.11;
(r) the certificate referred to in Section 7.17; and
(s) the notarial form of instrument of Transfer of the German
Licensee Shares.
3.3. BUYER'S CLOSING DELIVERIES. Subject to fulfillment or
--------------------------
waiver of the conditions set forth in Article VIII, at the Closing Buyer shall
deliver, or cause to be delivered, to Seller all the following:
(a) copies of Buyer's certificate of limited partnership
certified as of a recent date by the Secretary of State of Delaware;
(b) a certificate of good standing of Buyer issued as of a
recent date by the Secretary of State of Delaware;
(c) certified resolutions of the general partner of MLP
Acquisition with respect to the transactions contemplated hereby and incumbency
and specimen signature certificates dated the Closing Date with respect to the
officers of the general partner of MLP Acquisition executing this Agreement and
any Buyer Ancillary Agreement;
(d) opinion of counsel to Buyer referred to in Section 9.8;
(e) Instruments of Assumption duly executed by Buyer;
(f) the certificate contemplated by Section 9.1;
(g) each other document required to be delivered by Buyer
pursuant to Article IX;
(h) the Non-Competition Agreement duly executed by Buyer; and
(i) the Amended Partnership Agreement.
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<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND TFC
------------------------------------------------
Seller, General Partner and TFC, jointly and severally, represent and
warrant to Buyer as follows:
4.1. ORGANIZATION OF SELLER, GENERAL PARTNER AND TFC. (a) Seller
-----------------------------------------------
is a limited partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware. Seller is duly qualified to transact
business as a foreign limited partnership and is in good standing in each
jurisdiction in which Seller has reasonably determined that it is required to
qualify as set forth in Schedule 4.1(a). Seller has the partnership power and
authority to own or lease and to operate and use the Purchased Assets and to
carry on the Business as now conducted.
(b) General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. General
Partner is duly qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which General Partner has reasonably
determined that it is required to qualify as set forth in Schedule 4.1(b).
(c) TFC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
4.2. SUBSIDIARIES AND INVESTMENTS. Except for Marketable
----------------------------
Securities and the German Licensee Shares, Seller does not, directly or
indirectly, own, of record or beneficially, any outstanding voting securities or
other equity interests in any corporation, partnership, joint venture or other
entity.
4.3. AUTHORITY OF SELLER, GENERAL PARTNER AND TFC; NON-
-------------------------------------------------
CONTRAVENTION. (a) Seller has the partnership power and authority to execute,
- -------------
deliver and perform this Agreement and all the Seller Ancillary Agreements.
(b) The execution, delivery and performance hereof and of the
Seller Ancillary Agreements by Seller have been duly authorized and approved by
all requisite partnership action. This Agreement has been duly authorized,
executed and delivered by Seller and is the legal, valid and binding obligation
of Seller enforceable in accordance with its terms, and each of the Seller
Ancillary Agreements has been duly authorized by Seller, and upon execution and
delivery by Seller will be a legal, valid and binding obligation of Seller
enforceable in accordance with its terms.
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<PAGE>
(c) Except as set forth in Schedule 4.3 (and, as to the German
Licensee Shares, assuming the accuracy of Buyer's representation and warranty
set forth in Section 5.7 and the lifting of, or the compliance with, the
restrictions on Transfer of the German Licensee Shares), neither the execution
and delivery hereof or of any of the Seller Ancillary Agreements nor the
consummation of any of the transactions contemplated hereby or thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will, with or without notice and/or the lapse of time:
(i) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights, or result in the creation or imposition of any Encumbrance upon any
of the Purchased Assets under, (A) the certificate or agreement of limited
partnership of Seller, (B) any Seller Agreement, (C) any other material
note, instrument, agreement, mortgage, lease, license, franchise, permit or
other authorization, right, restriction or obligation to which Seller is a
party or any of the Purchased Assets is subject or by which Seller is
bound, (D) any Governmental Rule to which Seller is a party or any of its
assets is subject or by which Seller is bound or (E) any Governmental Rule
affecting Seller or its assets; or
(ii) require the approval, consent, authorization or act of, or
the making by Seller of any declaration, filing or registration with, (A)
any Governmental Body, except for required filings with the Federal Trade
Commission and the Department of Justice pursuant to HSR, or (B) any third
party, as to (x) any Contract or Proprietary Rights reasonably anticipated
to involve payments in excess of $10,000 over the twelve (12) month period
from the date of this Agreement or (y) any Seller Agreement.
(d) General Partner has all necessary power and authority to
execute, deliver and perform this Agreement on behalf of Seller and itself, all
the Seller Ancillary Agreements on behalf of Seller and all the Seller Ancillary
Agreements to which it is a party on behalf of itself.
(e) The execution, delivery and performance hereof and of the
Seller Ancillary Agreements by General Partner have been duly authorized and
approved by all requisite corporate action. This Agreement has been duly
authorized, executed and delivered by General Partner on behalf of itself and
Seller and is the legal, valid and binding obligation of General Partner
enforceable in accordance with its terms, and each of the Seller Ancillary
Agreements to which General Partner is a party has been duly authorized by
General Partner, and upon execution and
26
<PAGE>
delivery by General Partner will be a legal, valid and binding obligation of
General Partner enforceable in accordance with its terms.
(f) Except as set forth in Schedule 4.3 (and, as to the German
Licensee Shares, assuming the accuracy of Buyer's representation and warranty
set forth in Section 5.7 and the lifting of, or the compliance with, the
restrictions on Transfer of the German Licensee Shares), neither the execution
and delivery hereof or the consummation of any of the transactions contemplated
hereby nor compliance with or fulfillment of the terms, conditions and
provisions hereof will, with or without notice and/or the lapse of time:
(i) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, (A) the certificate of incorporation or by-laws of General
Partner, (B) any other note, instrument, agreement, mortgage, lease,
license, franchise, permit or other authorization, right, restriction or
obligation to which General Partner is a party or by which General Partner
is bound, (C) any Governmental Rule to which General Partner is a party or
by which General Partner is bound or (D) any Governmental Rule affecting
General Partner; or
(ii) as to General Partner, require the approval, consent,
authorization or act of, or the making by General Partner of any
declaration, filing or registration with, (A) any Governmental Body, except
for required filings with the Federal Trade Commission and the Department
of Justice pursuant to HSR, or (B) any third party.
(g) TFC has the corporate power and authority to execute,
deliver and perform this Agreement.
(h) The execution, delivery and performance hereof by TFC has
been duly authorized and approved by all requisite corporate action. This
Agreement has been duly authorized, executed and delivered by TFC and is the
legal, valid and binding obligation of TFC enforceable in accordance with its
terms.
(i) Except as set forth in Schedule 4.3 (and, as to the German
Licensee Shares, assuming the accuracy of Buyer's representation and warranty
set forth in Section 5.7 and the lifting of, or the compliance with, the
restrictions on Transfer of the German Licensee Shares), neither the execution
and delivery hereof or the consummation of any of the transactions contemplated
hereby nor compliance with or fulfillment of the terms, conditions and
provisions hereof will, with or without notice and/or the lapse of time:
27
<PAGE>
(i) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, (A) the certificate of incorporation or by-laws of TFC, (B)
any other note, instrument, agreement, mortgage, lease, license, franchise,
permit or other authorization, right, restriction or obligation to which
TFC is a party or by which TFC is bound, (C) any Governmental Rule to which
TFC is a party or by which TFC is bound, or (D) any Governmental Rule
affecting TFC; or
(ii) as to TFC, require the approval, consent, authorization or
act of, or the making by TFC of any declaration, filing or registration
with, (A) any Governmental Body, except for required filings with the
Federal Trade Commission and the Department of Justice pursuant to HSR, or
(B) any third party.
4.4. FINANCIAL STATEMENTS. (a) Schedule 4.4 contains the audited
--------------------
balance sheets of Seller as of December 31, 1990, 1989 and 1988 and related
statements of operations, cash flows and partners' investment for each of the
three years ended December 31, 1990, including the notes thereto, all of which
have been delivered to Buyer, certified by the Accountants, and the unaudited
balance sheet of Seller as of the October Balance Sheet Date and the related
financial statements (including related statements of operations, cash flows and
partners' investment for the ten month period ended the October Balance Sheet
Date), all of which have been delivered to Buyer. Such financial statements
present fairly, in all material respects, the financial position of Seller as of
December 31, 1990, 1989 and 1988 and the October Balance Sheet Date,
respectively, and the results of Seller's operations cash flows, and partners'
investment for each of the three years in the period ended December 31, 1990 and
the ten month period ended the October Balance Sheet Date, all in conformity
with GAAP on a consistent basis, subject, in the case of the October Balance
Sheet and the related statements of operations, cash flows and partners'
investment, to normal year end adjustments and the absence of footnotes.
(b) The amounts set forth in the first column of the October
Statement have been accurately derived from the October Balance Sheet.
(c) The "Management Profit Reconciliation" included in Schedule
4.4 accurately and correctly reconciles (i) the net loss in the statement of
operations for the ten month period ended the October Balance Sheet Date
referred to in Section 4.4(a) with (ii) the management profit in the monthly
management report for such period previously supplied to Buyer.
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<PAGE>
4.5. ABSENCE OF CHANGES. (a) Except as set forth in Schedule
------------------
4.5(a) and except for changes in general economic conditions, since the October
Balance Sheet Date there has been no material adverse change in the Purchased
Assets taken as a whole, the Business or the operations or financial condition
of Seller; provided, however, that with respect to the German Licensee, the
-------- -------
foregoing representation and warranty is made only to the knowledge of Seller.
(b) Except as set forth in Schedule 4.5(b), since the October
Balance Sheet Date Seller has conducted the Business only in the ordinary
course. Without limiting the generality of the foregoing, since the October
Balance Sheet Date, except as set forth in such Schedule, Seller has not with
respect to the Business:
(i) Sustained any material damage, or any destruction, damage by
fire, accident or other casualty of or to any of the Purchased Assets,
whether or not covered by insurance;
(ii) Paid, discharged or satisfied any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise) in
connection with, relating to or affecting in any way the Purchased Assets
or the Business, other than the payment, discharge or satisfaction of such
claims, liabilities or obligations in the ordinary course of business;
(iii) Cancelled or compromised any material debts without fair
consideration therefor, or waived any material claims or rights of
substantial value in connection with, relating to or affecting in any way
the Business;
(iv) Sold, transferred, assigned, leased, abandoned or otherwise
disposed of any of its properties or assets (real, personal or mixed,
tangible or intangible) in an amount in excess of $25,000, except for raw
materials, inventory or equipment disposed of in the ordinary course of
business;
(v) Granted any increase (including any increase pursuant to any
bonus, pension, profit sharing or other plan or commitment) in the
compensation payable or to become payable to any employee of Seller whose
annual compensation is at least $50,000 (other than any such increase
pursuant to collective bargaining agreements);
(vi) Entered into any contract, arrangement or lease in an amount
in excess of $25,000, except (i) trade or business contracts or
arrangements entered into in the
29
<PAGE>
ordinary course of business or (ii) any contract or arrangement set forth
in any Schedule to this Agreement;
(vii) Waived or released any material right under or amended or
terminated in any material respect any material agreement of the type
required to be set forth in any Schedule to this Agreement;
(viii) Made any change in its accounting methods or practices;
(ix) Materially changed any of its significant business policies;
(x) Terminated or failed to exercise any option to renew any
agreement that is or was material to the Business;
(xi) Made or entered into any contracts or commitments to make
any capital expenditures in excess of $100,000 individually;
(xii) Made any distribution of assets other than cash to any
Seller Group Member or Affiliate of Seller;
(xiii) Incurred any lockouts or strikes or, to the knowledge of
Seller, any dispute (other than routine individual grievances) or any
activity or proceeding by a labor union or representative thereof to
organize any employees of Seller not already subject to a collective
bargaining agreement, material slowdowns, work stoppages or, to the
knowledge of Seller, threats thereof by or with respect to such employees;
(xiv) Disposed of or permitted to lapse any Proprietary Rights
comprising a material part of the Purchased Assets or used by or in the
Business, or other than as contemplated by this Agreement (or otherwise in
connection with the potential sale of the Business as an entirety pursuant
to the auction process in which CCI participated) disclosed to any Person,
except as may be required by law or to governmental agencies, or affiliates
or representatives of Seller, any Proprietary Rights comprising part of the
Purchased Assets or used by or in the Business not theretofore a matter of
public knowledge; or
(xv) Agreed, whether in writing or otherwise, to take any action
described in this Section 4.5.
4.6. NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule
--------------------------
4.6, there are no material liabilities or obligations of Seller (whether known,
accrued, absolute, contingent or otherwise and whether due or to become due) of
a type
30
<PAGE>
normally reflected on a balance sheet prepared in accordance with the same
accounting principles, adjustments, methods and practices which were applied in
the preparation of the October Balance Sheet which are not shown on the October
Balance Sheet.
4.7. TAXES. (a) Except as set forth in Schedule 4.7, with
-----
respect to the Business, each of Seller and, to the knowledge of Seller, the
German Licensee has timely filed with the appropriate Governmental Bodies all
Tax Returns which are required to be filed, and has duly paid to the appropriate
Governmental Bodies all Taxes which are required to be paid, including, without
limitation, all Taxes withheld from employees' wages and all other Taxes due or
claimed to be due by any Governmental Body. Such Tax Returns properly reflect
the Taxes payable for the periods covered thereby. All such Taxes due for all
taxable periods ending on or prior to the Closing Date have been, or will be,
timely paid by Seller or, to the knowledge of Seller, the German Licensee, as
the case may be, or (in the case of Taxes not yet due and payable) will be
properly accrued and fully provided for in accordance with GAAP as applied by
Seller in preparation of the October Balance Sheet as part of the liabilities
shown on the Closing Date Balance Sheet. Neither Seller nor, to the knowledge of
Seller, the German Licensee has waived the statute of limitations on the right
of any Governmental Body to assess any additional Taxes or to contest the items
reported on any such Tax Returns.
(b) Seller at all times has been treated as a partnership, and
not as an association taxable as a corporation, for U.S. Federal income tax
purposes.
(c) Seller has provided Buyer with true and complete copies of
all Tax Returns filed by Seller for each of the past three (3) taxable years.
4.8. CONDITION OF ASSETS; OWNERSHIP OF ASSETS. (a) Except as set
----------------------------------------
forth in Schedule 4.8 and except for the Excluded Assets, the material tangible
Purchased Assets are serviceable or in working order and, in either such case,
suitable for use in accordance with the past practices of Seller. Seller has
adopted and follows reasonable maintenance policies with respect to material
tangible assets owned by Seller. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
SPECIFICALLY SET FORTH HEREIN, ALL THE ASSETS SOLD HEREUNDER ARE SOLD TO BUYER
WITHOUT IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR INTENDED USE OR
OTHERWISE.
(b) Neither the General Partner nor TFC owns or holds any
properties or assets that are used in the Business (other than the insurance
policies listed in Schedule 4.23).
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4.9. GOVERNMENTAL PERMITS. (a) Seller owns, holds or possesses
--------------------
all licenses, franchises, permits, privileges, immunities, approvals and other
authorizations from a Governmental Body which are necessary to entitle it to own
or lease, operate and use the Purchased Assets and to carry on and conduct the
Business substantially as currently conducted ("Governmental Permits") except
for such Governmental Permits as to which the failure to so own, hold or possess
would not have a material adverse effect on the Purchased Assets, the Business
or the operations or financial condition of Seller.
(b) Schedule 4.9(b) sets forth a list and brief description of
each Governmental Permit held by Seller as of the date hereof, except for such
incidental licenses, permits and other authorizations which would be obtainable
in due course by any qualified applicant without any undue burden in the event
of any lapse, termination, cancellation or forfeiture thereof. Except as set
forth in Schedule 4.9(b), (i) Seller has fulfilled and performed in all material
respects its obligations under each of the Governmental Permits listed on
Schedule 4.9(b), and no event has occurred or condition or state of facts exists
which constitutes or, after notice or lapse of time or both, would constitute a
material breach or default by Seller under any such Governmental Permit or which
permits or, after notice or lapse of time or both, would permit revocation or
termination of any such Governmental Permit; and (ii) no notice of cancellation,
of default or of any material dispute concerning any Governmental Permit, or of
any event, condition or state of facts described in the preceding clause, has
been received by Seller.
4.10. REAL PROPERTY. Seller owns no real property or any
-------------
options to acquire any real property.
4.11. REAL PROPERTY LEASES. Schedule 4.11 sets forth a list and
--------------------
brief description of each lease or similar agreement (showing the parties,
annual rental, expiration date, renewal and purchase options, if any, the uses
being made thereof and the location) under which Seller is lessee of, or holds
or operates, any real property owned by any Person other than Seller. All leases
are in full force and effect, free of subtenancies, except as set forth in
Schedule 4.11, or other occupancy rights. True and complete copies of the leases
and other agreements listed in Schedule 4.11 have been delivered or made
available to Buyer.
4.12. CONDEMNATION. As of the date hereof, to the knowledge of
------------
Seller, (a) neither the whole nor any part of any of the real property listed or
described in Schedule 4.11 is subject to any pending suit for condemnation or
other taking by any Governmental Body, and (b) no such condemnation or other
taking is threatened or contemplated.
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4.13. PERSONAL PROPERTY; SUFFICIENCY OF ASSETS. Schedule 4.13
----------------------------------------
contains a list of the aggregate net book values by category of the tangible
personal property owned by Seller in such detail as is reasonably determinable
by Seller. Except as set forth on Schedule 4.13, the Purchased Assets are free
and clear of all Encumbrances other than Permitted Encumbrances; provided, that,
-------- ----
for purposes of this Section 4.13, Permitted Encumbrances shall not include any
mechanics', materialmen's and similar liens.
4.14. PERSONAL PROPERTY LEASES. Schedule 4.14 contains a brief
------------------------
description of each lease, license or other agreement (including in each case
the annual rental, the expiration date thereof and a brief description of the
property covered) under which Seller is lessee of, or holds or operates for its
own use, any machinery, equipment, vehicle or other tangible personal property
owned by a Person other than Seller, except any such lease, license or other
agreement providing for base payments aggregating less than $25,000 over its
term (excluding renewal options) or which is terminable without penalty on sixty
(60) days' or less notice. Except as set forth on Schedule 4.14, the interests
of Seller in such property are free and clear of all Encumbrances other than
Permitted Encumbrances. True and complete copies of the leases, licenses and
other agreements listed in Schedule 4.14 have been delivered or made available
to Buyer.
4.15. INTELLECTUAL PROPERTY. (a) Schedule 4.15 contains a list
---------------------
of the following Proprietary Rights showing for each country in which the
Business is conducted, in each case as of the date hereof:
(i) For each patent, the patent number and date, a description
of the Invention, and the expiration date;
(ii) For each trademark, the name, registration number and date,
and goods and/or services in connection with which the trademark is used;
(iii) For each tradename, the mark, the date first used, and the
goods and/or services in connection with which the tradename is used;
(iv) For each trade secret, if any, a general description, the
place where such trade secret is stored, and the efforts made to prevent
disclosure thereof;
(v) For each copyright, if registered, the registration number
and date; and
(vi) If any registrations or applications for any of the
foregoing are in process, a description of the status
33
<PAGE>
thereof.
(b) Except as set forth in Schedule 4.15, Seller either:
(i) is the sole and exclusive owner of all rights obtainable in
the Proprietary Rights or such rights, to the extent not owned by Seller in
any country in which the Business is conducted by Seller, directly or
indirectly, including through any Licensee, are so obtainable, provided
that the foregoing representation is made only to the knowledge of Seller
with respect to any country other than the United States or Canada; or
(ii) possesses adequate rights to use all of such Proprietary
Rights in connection with the Business as presently conducted.
(c) To the knowledge of Seller, no Proprietary Right violates or
infringes the personal or property rights of any person, firm or corporation
and, except as set forth in Schedule 4.15, no claims of any such violation or
infringement are pending or threatened.
(d) To the knowledge of Seller, except as set forth in Schedule
4.15, there is not now pending or threatened any action, suit, claim, assessment
or proceeding, to challenge the validity, ownership or use of any of the
Proprietary Rights, or to revoke, cancel, rescind, modify or refuse to renew in
the ordinary course of business any of such Proprietary Rights as may have been
registered by Seller.
(e) Seller has maintained the policy of deterring potential
infringers or unauthorized users thereof to the extent necessary to protect any
Proprietary Rights that are material to Seller. Without derogating from the
preceding sentence, Schedule 4.15(e) sets forth a list of certain unauthorized
uses of Proprietary Rights.
4.16. ACCOUNTS RECEIVABLE. All accounts receivable of Seller have
-------------------
arisen from bona fide transactions by Seller in the ordinary course of the
Business.
4.17. ENVIRONMENTAL MATTERS.
---------------------
(a) Except as set forth in Schedule 4.17, Seller has obtained
and continues to maintain property and permits, licenses, consents and approvals
necessary for conducting the Business which are required under Environmental
Laws ("Environmental Approvals"), and Seller has not operated the Business in
violation of any Environmental Law or the terms of any Environmental Approval.
34
<PAGE>
(b) Except as set forth in Schedule 4.17:
(i) Seller has not used, stored, generated, discharged, emitted,
transported, disposed of or treated Hazardous Substances except in a manner
which complies with Environmental Laws.
(ii) To the knowledge of Seller, no prior owner, occupant, tenant
or user of any Facility has ever used, stored, generated, discharged,
emitted, transported, disposed of or treated Hazardous Substances, at, on
or from any Facility except in compliance with all Environmental Laws.
(iii) To the knowledge of Seller, there is not, and there has not
been, any Environmental Condition or release, or threat of release (as
those terms are defined in Section 101 of CERCLA) of Hazardous Substances
at, on, or from any Facility.
(c) Except as set forth in Schedule 4.17, all Environmental
Approvals may be Transferred to Buyer.
(d) Except as set forth in Schedule 4.17, Seller has not
received written notice of any pending or threatened investigation, claims,
enforcement proceedings, cleanup orders, citizen suits or other actions
instituted by any private party, employee or Governmental Body arising out of
the conduct or the operations of the Business, in connection with any
Environmental Laws, or as a result of any Environmental Condition at any
Facility.
4.18. EMPLOYEES AND RELATED AGREEMENTS; ERISA.
---------------------------------------
(a) For the purposes of Sections 4.18 and 7.4:
(i) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
(ii) "ERISA Affiliate" shall mean all members of a controlled
group of corporations and all trades and businesses (whether or not
incorporated) under common control and all other entities which, together
with Seller, are treated as a single employer under any or all of Sections
414(b), (c), (m) or (o) of the Code on either the date of this Agreement or
the Closing Date.
(iii) "Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
35
<PAGE>
(iv) "PBGC" shall mean the Pension Benefit Guaranty Corporation
or any person succeeding to the functions thereof.
(v) "Plan" shall mean any plan, program, arrangement, agreement
or commitment which is a pension, profit sharing, savings, thrift or other
retirement plan (including without limitation any "employee pension benefit
plan" as defined in Section 3(2) of ERISA), deferred compensation, health
or welfare plan (including without limitation any "employee welfare benefit
plan" as defined in Section 3(1) of ERISA), stock purchase, stock option,
performance share, bonus or other incentive or severance pay plan, policy
or procedure, or vacation or other employee benefit plan, program,
arrangement, agreement or commitment, whether or not written.
(vi) "Single Employer Defined Benefit Plan" shall mean a Plan
subject to Subtitle B of Title IV of ERISA which is not a Multiemployer
Plan.
(b) Except as set forth in Schedule 4.18(b) or 4.18(l), Seller
does not maintain or contribute to, or have any obligation to contribute to, and
Seller has no liability (including without limitation a liability arising out
of an indemnification, guarantee, hold harmless or similar agreement) or obliga-
tion with respect to, any Plan. Except as set forth in Schedule 4.18(b) or
4.18(l), no severance pay policy or procedure is maintained by Seller which does
or could apply to employees of Seller in any form whether written or unwritten
and whether or not disclosed to one or more employees. Seller neither maintains,
contributes to or is obligated to contribute to any Single Employer Defined
Benefit Plan and, except as set forth in Schedule 4.18(b), Seller neither
maintains, contributes to or is obligated to contribute to any Multiemployer
Plan which is subject to Subtitle B of Title IV of ERISA. Notwithstanding
anything to the contrary stated in this Section 4.18, no representation or
warranty is made with respect to severance pay obligations arising under
collective bargaining agreements.
(c) No event has occurred in connection with which Seller or any
Plan (other than a Multiemployer Plan) identified in Schedule 4.18(b) or any
"plan administrator" (as defined in Section 3(16) of ERISA) thereof, directly or
indirectly, is or could be subject to liability, other than for routine claims
for benefits, contingent or otherwise, or any lien, whether or not perfected,
under the terms of any Plan or under ERISA, the Code or any other law,
regulation or governmental order applicable to any Plan at any time maintained
or contributed to by Seller or any ERISA Affiliate, including, without
limitation, Sections 302(f), 404, 406, 409, 502(c)(1), 502(c)(3), 502(g),
502(i), 502(l), 4062, 4063, 4064, 4068, 4069, 4071 or 4201 of ERISA, or
36
<PAGE>
Sections 412(n), 4971, 4975, 4976, 4980B or 5000 of the Code, or under any
agreement, instrument, statute, rule of law or regulation pursuant to or under
which Seller has agreed to indemnify or is required to indemnify any person
against liability incurred under, or for a violation or failure to satisfy the
requirements of, any such statute, regulation or order. No Plan listed in
Schedule 4.18(b) which is not a Multiemployer Plan is subject to Section 302 of
ERISA or Section 412 of the Code.
(d) With respect to the Savings Plan (as hereinafter defined),
the Health and Welfare Benefit Program (as hereinafter defined) and any
Multiemployer Plan identified in Schedule 4.18(b), the aggregate of the annual
employer contributions and other direct expenses paid in connection with such
Plan by Seller for each of the last three plan years of each such Plan are set
forth in Schedule 4.18(d).
(e) With respect to each Multiemployer Plan identified in
Schedule 4.18(b) which is subject to the provisions of Subtitle B of Title IV of
ERISA, to the knowledge of Seller, (a) the trustees of each such Plan have not
instituted proceedings to terminate, reorganize or merge any such Multiemployer
Plan; (b) no condition or event exists or has occurred which presents a material
risk of the termination, reorganization or merger of any such Multiemployer Plan
which could result in the imposition on Seller of any liability under Title IV
or ERISA or otherwise, whether to the PBGC or otherwise, including without
limitation termination liability, withdrawal liability or partial withdrawal
liability; (c) no such Multiemployer Plan has filed an application for financial
assistance pursuant to the provisions of Section 4245(f) or 4281(d) of ERISA;
(d) no contribution to any such Multiemployer Plan required of Seller pursuant
to the terms thereof or of any collective bargaining agreement is nondeductible
by reason of any provision of Section 412 of the Code; (e) no liability under
Sections 4201 of ERISA or otherwise under Title IV of ERISA would exist if
Seller withdrew from or ceased to be an employer under any Multiemployer Plan;
and (f) there are no unfunded vested benefits as determined under Section 4211
of ERISA with respect to any such Multiemployer Plan allocable to Seller.
(f) All payments and contributions due from Seller under each
Plan identified in Schedule 4.18(b) have been made and all amounts properly
accrued to date as liabilities of Seller which have not been paid have been or
will or will prior to the Closing Date have been properly recorded on the books
of Seller and, to the extent not theretofore paid, will be reflected as a
liability on the Closing Date Balance Sheet.
(g) Except as provided in Schedule 4.18(g), no "employee welfare
benefit plan" as defined in Section 3(1) of ERISA or "multiple employer welfare
arrangement" as defined in
37
<PAGE>
Section 3(40) of ERISA provides benefits, including without limitation death or
medical benefits (whether or not insured) with respect to any current or former
employee of Seller beyond their retirement or other termination of service other
than (i) coverage mandated by applicable law or (ii) disability benefits that
have been fully provided for by insurance or otherwise.
(h) The transactions contemplated by this Agreement will not
result in any payment or series of payments by Buyer under any Plan established
by Seller to any person of a parachute payment within the meaning of Section
280G of the Code.
(i) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any employee or former employee of Seller to
severance pay, unemployment compensation or any other payment except as
expressly provided in this Agreement or (ii) result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code for
which an exemption is not available.
(j) Other than as set forth in Schedule 4.18(q), there has been
delivered to Buyer with respect to each Plan (other than a Multiemployer Plan)
identified in Schedule 4.18(b):
(i) A copy of the annual report (with accompanying schedules and
exhibits), if required under ERISA, which has been filed with respect to
such Plan for the two most recently completed plan years. The information
contained in such report (including such schedules and exhibits) is correct
and complete and there has been no material adverse change in the condition
of such Plan, financial or otherwise, since the date thereof;
(ii) A copy of the actuarial report, if any, with respect to each
such Plan for the last two years. The information contained therein, and
the information furnished by the administrator of such Plan or by Seller or
any ERISA Affiliate in connection with the preparation thereof, is correct
and complete and there has been no material adverse change therein since
the date thereof;
(iii) A copy of the most recent summary plan description,
together with each Summary of Material Modifications with respect thereto,
required under ERISA with respect to such Plan, all material employee
communications relating to such Plan, distributed within the last twelve
(12) months and, a true and complete copy of such Plan;
(iv) If such Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding vehicle and the
latest financial statements thereof; and
38
<PAGE>
(v) The most recent determination letter received from the
Internal Revenue Service with respect to each Plan that is intended to
qualify under Section 401 of the Code.
(k) Neither Seller nor any ERISA Affiliate has made any
agreement, understanding or promise, whether written or oral, to create,
establish, sponsor, maintain or contribute, directly or indirectly, to or under
any additional Plan for the benefit of current or former employees of Seller
nor, except as set forth in Schedule 4.18(k), to amend or modify any existing
Plan identified in Schedule 4.18(b) in any manner not reflected in the plan
documents of such Plan delivered to Buyer on or before the date hereof.
(l) Except as set forth in Schedule 4.18(l), Seller is not a
party to any collective bargaining agreements, whether or not expired. With the
exception of representation pursuant to such agreements, there are no labor
unions or other organizations representing or to the knowledge of Seller
purporting to repre sent or attempting to represent any employee of Seller. All
employee benefit plans (as defined in Section 3(3) of ERISA) which are
specifically referred to in any collective bargaining agreement are listed in
Schedule 4.18(l) and are defined as such in Schedule 4.18(l).
(m) Seller has not violated any provision of Federal or state
law or any governmental rule or regulation, or any order, ruling, decree,
judgment or arbitration award of any court, arbitrator or any government agency
regarding the terms and conditions of employment of employees, former employees
or prospective employees or other labor related matters, including, without
limitation, laws, rules, regulations, orders, rulings, decrees, judgments and
awards relating to discrimination (including without limitation discrimination
on the basis of age, sex, race or religion), fair labor standards and
occupational health and safety, wrongful discharge or violation of the personal
rights of employees, former employees or prospective employees or state
temporary disability laws, rules or regulations.
(n) There is no unfair labor practice charge or complaint
pending or, to the knowledge of Seller, threatened against Seller before the
National Labor Relations Board or any State Labor Relations Board. There are no
claims of discrimination of any kind pending or, to the knowledge of Seller,
threatened against Seller before any Governmental Body, except as set forth in
Schedule 4.18(n).
(o) There is no labor strike or, to the knowledge of Seller,
dispute, material slowdown, material work stoppage or lockout actually pending
or, to the knowledge of Seller,
39
<PAGE>
threatened against Seller.
(p) Each Plan to which Seller contributes or has any obligation
to contribute (other than any Multiemployer Plan) and, to the knowledge of
Seller, each Multiemployer Plan to which Seller contributes or has any
obligation to contribute which is intended to be qualified under Section 401 of
the Code, has received a favorable determination letter from the Internal
Revenue Service with respect to such qualification and with respect to the
exemption from tax of the trusts created thereunder under Section 501(a) of the
Code, and nothing has occurred that has affected or is likely to adversely
affect such qualification or exemption since the date of such letter with
respect to each Plan (other than a Multiemployer Plan) and, to the knowledge of
Seller, with respect to each Multiemployer Plan.
(q) Except as set forth in Schedule 4.18(q), all reports and
other information required under ERISA or any other applicable law or regulation
to be filed by Seller in respect of any Plan identified in Schedule 4.18(b), or,
with respect to such a Plan other than a Multiemployer Plan, the administrator
thereof, on or prior to the date hereof with the relevant governmental
authority and/or distributed or made available to any Plan participant and
beneficiary (including "alternate payees", as such term is defined in Section
206(d)(3)(K) of ERISA), as the case may be, have been filed, distributed or made
available in accordance with ERISA or such other applicable law or regulation,
as the case may be, and all such reports and other information are true and
correct in all material respects as of the date given.
(r) Seller has not entered into any agreement, written or
otherwise, relating to its Medical Care/Dental Care/Basic Life/AD&D/Vision Care
Plan, obligating Seller or its successor in interest to make any supplemental or
retrospective premium payments for the current or any prior contract period in
the event of adverse experience, termination of the minimum premium arrangement,
or termination of an insurance contract, relating to such Plan, except as
otherwise expressly stated in the written contract effective January 1, 1990
setting forth the minimum premium arrangement under such plan.
4.19. CONTRACTS. (a) Except as set forth on Schedule 4.19(a) or
---------
4.19(b) (or, in the case of Section 4.19(a)(vii), except as set forth in any
other Schedule hereto or except as would be required to be disclosed in any
other Schedule hereto but for the dollar limitation or any materiality
limitation contained herein):
(i) There are no binding contracts, commitments or agreements
for the purchase of any equipment, materials or supplies that individually
(or in a series of related
40
<PAGE>
transactions) involve an expenditure by Seller in excess of $100,000 over
the remaining term of each such contract, commitment or agreement;
(ii) There are no government contracts or other agreements,
contracts or commitments with customers that individually (or in a series
of related transactions other than a relation that exists solely as a
result of coordination of agreements, contracts or commitments among
locations of individual national accounts which are not the subject of a
master national accounts contract) involve a payment to Seller in excess of
$50,000 per annum;
(iii) There are no written contracts for the employment or
compensation of any employee individually in excess of $50,000 per annum or
which are not terminable on sixty (60) days' or less notice;
(iv) There are no partnership or joint venture contracts or
arrangements or any other agreements involving a sharing of revenues or
profits material to the Purchased Assets or the Business to which Seller is
a party or by which Seller is bound;
(v) Except as described in Section 4.15, 4.20 or a Schedule
thereto, except for licenses that would be required to be described in such
a Schedule but for the limitations contained in Section 4.15 and except for
ordinary course commercial software, there are no licenses to which Seller
is a party or by which it is bound relating to the use of personal or
property rights of others, there are no licenses granted to others to use
the Proprietary Rights, and there are no royalty contracts to which Seller
is a party or by which it is bound individually (or in a series of related
transactions) involving annual payments in excess of $50,000;
(vi) There are no contracts or agreements for the sale of any of
the Purchased Assets (other than inventory sales in the ordinary course of
business) or the grant of any rights to purchase any of the Purchased
Assets;
(vii) There are no contracts or agreements with consultants,
advisors, salespeople, sales representatives, distributors, lobbyists,
dealers or independent contractors to which Seller is a party or by which
Seller is bound other than those that Seller enters into with salespeople
in the ordinary course of business, the standard form of which (from which
there are no material deviations) is set forth in Schedule 4.19(b)(vii);
and
(viii) There are no contracts or agreements to which
41
<PAGE>
Seller is a party or by which Seller is bound restricting Seller from
carrying on the Business in its entirety in any jurisdiction other than
contracts or agreements with Licensees.
(b) Schedule 4.19(b) sets forth a list of each contract or
other agreement between Seller and a Licensee establishing the licensing
arrangement between them, including its effectiveness date, its termination
date and the date of any amendments, modifications or material written waivers
thereto.
(c) True and complete copies of the contracts, agreements,
commitments, leases and other instruments listed in Schedules 4.19(a) and
4.19(b) have been delivered or made available to Buyer.
4.20. MUSIC SERVICES CONTRACTS.
------------------------
(a) Schedule 4.20(a) contains a list of all agreements between
Seller and a performing rights society. To the extent any such agreement has
expired, Schedule 4.20(a) lists the agreements or consent decree, if any, which
contain the mechanism or procedure for determining the basis on which
Participations are to be calculated and paid in connection with amendments or
extensions of such agreements past the expiration date thereof.
(b) Schedule 4.20(b) contains a list of all musical
compositions, the copyrights of which are owned by Seller. All of Seller's
rights in such compositions have been acquired pursuant to agreements, forms of
which are included in Schedule 4.20(b). There are no material deviations from
such forms.
(c) Substantially all of Seller's rights in the tapes and other
reproductions of recordings with respect to Background Music Services were
acquired pursuant to Contracts with either producers or exclusive publishers. A
list of the contracting parties for such Contracts is included in Schedule
4.20(c). With respect to such Contracts, there are no Participations except to
the extent Seller is required to pay the publishers of such recordings a
mechanical license fee.
(d) Substantially all of Seller's rights in the tapes and other
reproductions of recordings with respect to Foreground Music Services were
acquired pursuant to Contracts, a list of which is contained in Schedule
4.20(d).
(e) Substantially all tapes of music embodied in sound recording
relating to Background Music Services or Foreground Music Services are either on
the premises of a subscriber or Licensee, in transit or in those duplicating or
storage facilities listed in Schedule 4.20(e).
42
<PAGE>
(f) Substantially all of the rights to make arrangements and
mechanically reproduce musical compositions for the purpose of making the
recordings referred to in paragraphs (c), (d) and (e) of this Section 4.20 were
acquired either pursuant to the Contracts listed in Schedule 4.20(f) or pursuant
to an agreement between Seller and the Harry Fox Agency, Inc., dated January 1,
1991, which is listed in Schedule 4.20(f).
(g) With respect to all Music Services Contracts:
(i) Other than in connection with those agreements set forth in
Schedule 4.20(a), 4.20(b), 4.20(c), 4.20(d), 4.20(f), or 4.20(g)(i), there
are no provisions requiring Seller to pay Participations;
(ii) Since December 31, 1986, no audits have been conducted by
the contracting parties in connection with Music Services Contracts set
forth in Schedule 4.20(a), 4.20(b), 4.20(c), 4.20(d) or 4.20(f), except to
the extent itemized in Schedule 4.20(g)(ii). Seller has paid the amounts
set forth in Schedule 4.20(g)(ii) under such completed audits, if any. No
audit is, to the knowledge of Seller, threatened or continuing except as
set forth in Schedule 4.20(g)(ii); and
(iii) Seller's books and records, as currently constituted, are
sufficient in all material respects to calculate all Participations and
furnish to third parties all information required to be furnished under
Music Services Contracts as and when required.
4.21. STATUS OF CONTRACTS. Except as set forth in Schedule 4.21,
-------------------
each of the leases, licenses, contracts and other agreements listed in Schedule
4.11, 4.14, 4.15, 4.18(b), 4.19(a), 4.19(b), 4.20(a), 4.20(b), 4.20(d), 4.20(f)
or 4.20(g)(i) ("Seller Agreements") constitutes a valid and binding obligation
of Seller (subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general equity principles) and is in full force and effect; provided,
--------
however, that the foregoing representation and warranty shall not be deemed to
- -------
have been breached with respect to any licensing agreement between Seller (as
successor licensor) and any Licensee which Seller acquired from a third party
transferor ("Predecessor Licensing Agreements") solely to the extent such
validity, binding effect or status may be affected by the failure of such third
party transferor to comply with applicable franchise or licensing laws. Except
as set forth in Schedule 4.3 and except for Seller Agreements which by their
terms will expire prior to the Closing Date or otherwise terminate prior to the
Closing Date in accordance with the provisions hereof or that constitute
Excluded Assets,
43
<PAGE>
the Seller Agreements may be Transferred to Buyer pursuant to this Agreement
without breaching the terms thereof or resulting in the forfeiture or impairment
of any rights thereunder and without the consent, approval or act of, or the
making of any filing with, any other party. Other than defaults under the
Predecessor Licensing Agreements solely attributable to the failure of a third
party transferor (as described in the proviso above) to comply with applicable
franchise or licensing laws or the failure to comply with any provision of a
Predecessor Licensing Agreement specifically requiring compliance with such
laws, Seller is not in material default under any of the Seller Agreements and
no event has occurred and no condition or state of facts exists which, with the
passage of time or the giving of notice or both, would constitute such a default
by Seller. To the knowledge of Seller, no other party to any of the Seller
Agreements is in material default thereunder. Seller has not received any
written claim that it is in default under any of the Predecessor Licensing
Agreements.
4.22. NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as set
---------------------------------------------
forth in Schedule 4.22:
(a) Seller is in compliance in all material respects with all
Governmental Rules which are applicable to the Purchased Assets or the Business,
except that no such representation or warranty is made as to compliance with
franchising laws and related Governmental Rules solely applicable to the
Predecessor Licensing Agreements;
(b) There are no lawsuits, claims, suits, audits, proceedings
or, to the knowledge of Seller, investigations pending or threatened against
Seller; and
(c) There is no action, suit or proceeding pending or, to the
knowledge of Seller, threatened which questions the legality, propriety or
validity of the transactions contemplated hereby.
4.23. INSURANCE. Seller or its Affiliates maintain, with
---------
respect to the Business and the Purchased Assets, policies of fire and extended
coverage and casualty, liability and other forms of insurance, which such
policies are set forth in Schedule 4.23, in such amounts and against such risks
and losses as are prudent for the operation of the Business and shall use
reasonable efforts (including without limitation payment of all premiums and
giving of all requisite notices required by such policies) to maintain such
insurance or comparable insurance in full force and effect immediately prior to
the Closing Date.
4.24. ORGANIZATION, CAPITALIZATION AND FINANCIAL STATEMENTS OF THE
------------------------------------------------------------
GERMAN LICENSEE. (a) To the knowledge of Seller, the German Licensee is a
- ---------------
limited liability company duly
44
<PAGE>
organized and validly existing under the laws of the Federal Republic of
Germany; (b) the copy of the Articles of Association (Gesellschaftvertrag) of
the German Licensee heretofore delivered by Seller to Buyer is a true and
correct copy of the copy thereof most recently furnished to Seller; (c) Seller
owns the German Licensee Shares free and clear of all Encumbrances other than
Permitted Encumbrances and other than the associated rights of first refusal and
(d) to the knowledge of Seller, the German Licensee Shares represent no less
than 35% of the outstanding shares of stock of the German Licensee. Upon
delivery to the Buyer on the Closing Date or pursuant to Section 7.30, as the
case may be, of the instruments of conveyance and Transfer contemplated hereby,
Seller will Transfer valid title to the German Licensee Shares free and clear of
all Encumbrances (other than Permitted Encumbrances). Schedule 4.24 contains
true and correct copies of the most recent financial statements of the German
Licensee most recently made available to Seller by the German Licensee, as to
which financial statements no other representation or warranty is made.
4.25. TRANSACTIONS WITH AFFILIATES AND TRUSTS. Except as
---------------------------------------
described in Schedule 4.25, since December 31, 1987 there have been no
intercompany services or products being provided by (a) the Business to any of
Seller's Affiliates or any of the Trusts or (b) any of Seller's Affiliates or
any of the Trusts to the Business, and there have been no contracts between
Seller, on the one hand, and any of its Affiliates or any of the Trusts, on the
other.
4.26. INVESTMENT CANADA. No part of the Business as currently
-----------------
conducted by Seller is a "Canadian Business" within the meaning of Section 3 of
the Investment Canada Act.
4.27. PERSONNEL. Schedule 4.27 sets forth the names and position
---------
titles of each employee of the Business whose annual compensation is in excess
of $50,000 and, as of the date of this Agreement, each such employee's current
annual salary and other compensation. As of the date of this Agreement, Seller
has not received notice from any employee listed in Schedule 4.27 of his or her
intention to resign or retire from employment.
4.28. INVENTORY. Except as set forth in Schedule 4.28, all
---------
inventory of Seller is of a quality usable and salable in the ordinary course of
business, except for items of obsolete materials and materials of below-standard
quality (all of which have been written down in the October Balance Sheet to
realizable market value or for which adequate reserves have been provided
therein, in each case to the extent required by GAAP as applied by Seller
(including methods and practices) in the preparation of the October Balance
Sheet), or which have become obsolete in the ordinary course of business since
the October Balance Sheet Date.
45
<PAGE>
4.29. CUSTOMERS AND SUPPLIERS. Except as set forth in Schedule
-----------------------
4.29, Seller has not received any written notice of any termination or
cancellation of (or of any intent to terminate or cancel) the business
relationship of the Business with (y) any single customer or any group of
affiliated customers who represented one percent (1%) or more of the
consolidated revenues of the Business during the twelve month period ended
December 31, 1991, or (z) any single supplier or group of affiliated suppliers
who provided one percent (1%) or more of the requirements of the Business during
the twelve month period ended December 31, 1991.
4.30. FCC COMPLIANCE. (a) Except as set forth in Schedule 4.30,
--------------
Seller has obtained all necessary Governmental Permits from the FCC to own and
operate all multiple address system ("MAS") microwave radio stations that Seller
currently owns and operates, and all such Governmental Permits are in full force
and effect. All such Governmental Permits and all applications by Seller for
Governmental Permits from the FCC are set forth in Schedule 4.30.
(b) Except as set forth in Schedule 4.30, all of Seller's MAS
microwave radio stations are operated in compliance in all material respects
with all terms and conditions of their respective Governmental Permits issued by
the FCC and all applicable Governmental Rules. Except as set forth in Schedule
4.22(a), all other personal property of Seller that transmits or receives radio
frequency waves is operated by Seller in compliance in all material respects
with applicable Governmental Rules.
(c) There is not now pending or, to the knowledge of Seller,
threatened any action by or before the FCC to revoke, cancel, rescind, modify or
refuse to renew in the ordinary course any of the Governmental Permits issued to
Seller by the FCC. There is not now pending, issued or, to the knowledge of
Seller, threatened any order to show cause, notice to Seller of violation or
notice to Seller of apparent liability or forfeiture by or before the FCC, nor
are there any complaints against Seller pending before the FCC. Except as set
forth in Schedule 4.30, Seller has no reason to believe that any basis exists
for the loss or modification of any of the Governmental Permits issued to Seller
by the FCC, or for any fine, forfeiture or other penalty to be levied against
Seller by the FCC in connection with its operation of MAS microwave radio
stations.
(d) To the knowledge of Seller, MicroSpace is licensed by the
FCC for interim operation of a DBS Facility and Seller has no knowledge of any
reason for MicroSpace's authorization not being renewed in the ordinary course.
(e) To the knowledge of Seller, the SCA Lessors are licensed by
the FCC to conduct FM broadcast operations in the
46
<PAGE>
communities in which they are broadcasting, and are operating their stations in
conformity in all material respects with the Communications Act of 1934, as
amended (the "Communications Act"), and the FCC Rules. To the knowledge of
Seller, each SCA Lessor is licensed for a term expiring on the date next to its
call sign set forth in Schedule 4.30. Seller knows of no reason each such
license should not be renewed in the ordinary course.
(f) Except as described in Schedule 4.30, to the knowledge of
Seller, none of MicroSpace or any of the SCA Lessors is a subject of any
investigation, notice of violation, order or complaint issued by or before any
Governmental Body, including the FCC, or of any other proceedings which could
threaten or adversely affect the validity or the continued effectiveness of the
FM radio station licenses held by the SCA Lessors or the leases of MicroSpace
for satellite transponder capacity.
(g) Schedule 4.30 lists all of the material lease agreements
between Seller and any Person relating to the location of all towers, antennas,
transmitters, satellite transmit dishes, satellite receivers and translators
(collectively, the "Tower Site Leases") used in connection with the operation of
Seller's business and such Tower Site Leases constitute the only Tower Site
Leases necessary in connection with the business of Seller as now conducted.
4.31. TORRANCE NOTE. At February 29, 1992 the Torrance Note
-------------
had an outstanding principal amount of $550,000 and accrued and unpaid interest
of $861,779.32.
4.32. NO FINDER. Neither Seller nor any party acting on its
---------
behalf has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of the transactions contemplated hereby
other than to Veronis, Suhler & Associates Inc., whose fees and expenses, to the
extent payable, shall be paid by Seller or its Affiliates.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller that:
5.1. ORGANIZATION OF BUYER. (a) Buyer is a limited partnership
---------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full power and authority to own or lease and to
operate and use its properties and assets and to carry on its business as now
conducted.
(b) MLP Acquisition, L.P., a Delaware limited partnership ("MLP
Acquisition"), is a limited partnership duly organized, validly existing and in
good standing under the laws
47
<PAGE>
of the State of Delaware.
5.2. AUTHORITY OF BUYER; NON-CONTRAVENTION. (a) Buyer has full
-------------------------------------
power and authority to execute, deliver and perform this Agreement and all the
Buyer Ancillary Agreements.
(b) The execution, delivery and performance hereof and the Buyer
Ancillary Agreements by Buyer have been duly authorized and approved by all
requisite partnership action. This Agreement has been duly authorized, executed
and delivered by Buyer and is the legal, valid and binding agreement of Buyer
enforceable in accordance with its terms, and each of the Buyer Ancillary
Agreements has been duly authorized by Buyer and upon execution and delivery by
Buyer will be a legal, valid and binding obligation of Buyer enforceable in
accordance with its terms.
(c) Neither the execution and delivery hereof or any of the
Buyer Ancillary Agreements nor the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment of the terms,
conditions and provisions hereof or thereof will, with or without notice and/or
the lapse of time:
(i) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under (A) the certificate or agreement of limited partnership of
Buyer, (B) any note, instrument, agreement, mortgage, lease, license,
franchise, permit or other authorization, right, restriction or obligation
to which Buyer is a party or any of its properties is subject or by which
Buyer is bound, (C) any Governmental Rule to which Buyer is a party or by
which it is bound or (D) any Governmental Rule affecting Buyer; or
(ii) require the approval, consent, authorization or act of, or
the making by Buyer of any declaration, filing or registration with, (A)
any Governmental Body, except for required filings with the Federal Trade
Commission and the Department of Justice pursuant to HSR, or (B) any third
party.
(d) MLP Acquisition has full power and authority to execute,
deliver and perform this Agreement on behalf of Buyer and all the Buyer
Ancillary Agreements on behalf of Buyer.
(e) The execution and delivery hereof by MLP Acquisition on
behalf of Buyer have been duly authorized and approved by all requisite
partnership action.
(f) Neither the execution and delivery hereof or
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<PAGE>
any of the Buyer Ancillary Agreements nor the consummation of any of the
transactions contemplated hereby or thereby nor compliance with or fulfillment
of the terms, conditions and provisions hereof or thereof will, with or without
notice and/or the lapse of time:
(i) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, (A) the certificate or agreement of limited partnership of
MLP Acquisition, (B) any note, instrument, agreement, mortgage, lease,
license, franchise, permit or other authorization, right, restriction or
obligation to which MLP Acquisition is a party or any of its properties is
subject or by which MLP Acquisition is bound, (C) any Governmental Rule to
which MLP Acquisition is a party or by which it is bound or (D) any
Governmental Rule affecting MLP Acquisition; or
(ii) require the approval, consent, authorization or act of, or
the making by MLP Acquisition of any declaration, filing or registration
with, any Governmental Body, except for required filings with the Federal
Trade Commission and the Department of Justice pursuant to HSR, or any
third party.
5.3. PRIORITY PARTNERSHIP INTEREST; EXCHANGE NOTES. When issued,
---------------------------------------------
the Priority Partnership Interest shall be duly authorized, validly issued and
non-assessable. Should the Exchange Notes be issued upon exchange of the
Priority Partnership Interest, the Exchange Notes will have been duly authorized
and will be a valid and binding obligation of Buyer enforceable in accordance
with their terms.
5.4. NO PRIOR ACTIVITIES; NO SUBSIDIARIES. Buyer has not (a)
------------------------------------
incurred, nor will it incur prior to the Closing Date, directly or indirectly,
any liabilities or obligations, or (b) engaged in any business activity or
transaction, or (c) entered into any agreement or arrangement with any Person,
except, in any such case, in connection with its organization or with the
negotiation of this Agreement, the financing for the transactions contemplated
by this Agreement and the performance hereof and thereof and the consummation of
the transactions contemplated hereby and thereby. Buyer has not formed or
Transferred any assets to any Subsidiaries.
5.5. CAPITALIZATION; FINANCING. Buyer has received a commitment to
-------------------------
subscribe for at least $15,000,000 of its equity interests, such commitments
being set forth in Schedule 5.5. Buyer has received a commitment to purchase at
least $10,000,000 of its senior subordinated notes from Barclays Bank PLC, such
49
<PAGE>
commitment being set forth in Schedule 5.5. The terms of such equity interests
(to the extent not set forth in the Amended Partnership Agreement), and any
management or other incentive plan for management employees of Buyer to own or
purchase any interests in Buyer or to receive any incentive, performance-based,
equity-linked or similar payments (other than under the management option plan
set forth in Schedule 5.5) are described in Schedule 5.5. Set forth on Schedule
5.5 is a true and correct copy of the Commitment Letter from Union Bank of
Switzerland with respect to up to $40,000,000 of senior bank financing. As of
the date of this Agreement, nothing has come to the attention of Buyer which
would lead Buyer to believe that on the Closing Date Buyer will not receive the
proceeds of the financing described in this Section 5.5 in order to enable Buyer
to consummate the transactions contemplated by this Agreement, it being
expressly acknowledged by Seller that such commitments contain numerous closing
conditions and no assurance can be given that such conditions will be waived or
satisfied on or prior to the Closing Date.
5.6. FINANCIAL ABILITY. Assuming performance by the parties
-----------------
providing financing under the commitments referred to in Section 5.5, Buyer has
the financial ability to consummate the transactions contemplated hereby.
5.7 BUYER SALES. The aggregate sales of Buyer and CCI and all
-----------
corporations and partnerships in which CCI is the majority equity owner or is
capable of exercising control over for the year ended December 31, 1991 did not
exceed DM 2,000,000,000.
5.8 NO FINDER. Neither Buyer nor any party acting on its behalf
---------
has paid or become obligated to pay any fee or commission to any broker, finder
or intermediary for or on account of the transactions contemplated hereby other
than to CCI whose fees and expenses, to the extent payable, shall be paid by
Buyer.
ARTICLE VI
ACTION PRIOR TO THE CLOSING DATE
--------------------------------
Between the date of this Agreement and the Closing Date:
6.1. INVESTIGATION OF SELLER BY BUYER; ENVIRONMENTAL AUDIT. (a)
-----------------------------------------------------
Seller shall afford to the officers, employees and authorized representatives of
Buyer (including independent public accountants, lenders (and their attorneys),
appraisers, attorneys, underwriters and other agents and representatives)
access, during normal business hours, to the offices, properties, employees,
books and business and financial records
50
<PAGE>
(including computer files, retrieval programs and similar documentation) of
Seller to the extent Buyer deems desirable and shall furnish to Buyer or its
authorized representatives such additional information concerning the Purchased
Assets and the Business as shall be requested, including all such information to
enable Buyer or such representatives to verify the accuracy of the
representations and warranties of Seller contained herein, to verify that the
covenants of Seller contained herein have been complied with and to determine
whether the conditions set forth in Article VIII have been satisfied. Seller
shall provide Buyer with copies of all documents, correspondence, and other
materials relating to the testing, removal and disposal of Hazardous Substances
at the property leased by Seller located at 1000 Shames Drive, Westbury, New
York, including without limitation all documents, correspondence and other
materials between Seller and any Governmental Bodies relating thereto. Buyer
agrees to hold such information in confidence in a manner consistent with the
Confidentiality Agreement.
(b) Buyer shall have the right to cause an independent
environmental consultant chosen by Buyer at its sole discretion (the
"Environmental Consultant"), to inspect and audit, any or all Facilities for the
existence of any and all violations of Environmental Laws (the "Phase I Audit")
and to deliver a report in a form reasonably acceptable to Buyer and its lenders
describing the findings and conclusions of the Phase I Audit. If (a) any of
Buyer's lenders requests the Buyer to conduct testing, sampling, analyses or
other processes at any or all Facilities (the "Phase II Audit"), or (b) the
Phase I Audit reveals that a Phase II Audit is reasonably necessary to ascertain
the presence or existence of Hazardous Substances at, on or under any Facility
or Facilities or of any violation of an Environmental Law, Buyer shall have the
right to cause the Environmental Consultant to conduct the Phase II Audit and to
deliver a report, a copy of which shall be delivered to Seller, in a form
reasonably acceptable to Buyer and its lenders describing the findings and
conclusions of the Phase II Audit. Access to conduct such Phase I and Phase II
Audits shall be afforded to Buyer and the Environmental Consultant by Seller
upon receipt of reasonable advance notice and during normal business hours and
shall be had or done in such a manner so as not to interfere with the normal
conduct of business of Seller. Subject to the foregoing, the scope, sequence and
timing of the Phase I and Phase II Audits shall be at the sole discretion of
Buyer and its lenders. The cost and expenses of the Phase I and Phase II Audits
shall be borne by Buyer.
6.2. NOTICES. Each party shall promptly notify the other of any
-------
action, suit or proceeding that shall be instituted or threatened against such
party to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated hereby. Seller shall promptly notify Buyer of any
action, audit,
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<PAGE>
lawsuit, claim, proceeding or investigation that may be threatened, brought,
asserted or commenced against Seller which would have been listed in Schedule
4.22 if such action, audit, lawsuit, claim, proceeding or investigation had
arisen prior to the date hereof.
6.3. OTHER ACTION; CONSENTS OF THIRD PARTIES; GOVERNMENTAL
-----------------------------------------------------
APPROVALS. (a) Seller shall use its best efforts, subject to paragraph (c) of
- ---------
this Section 6.3, and Buyer shall cooperate, promptly to (i) cause the
fulfillment at the earliest practicable date of all the conditions to their
respective obligations to consummate the sale and purchase of the Purchased
Assets under this Agreement and the other transactions contemplated hereby, (ii)
obtain all consents, amendments or permits from third parties, including
Governmental Bodies, which are required by the terms thereof, hereby or
otherwise for due and punctual consummation by Buyer and Seller of the
transactions contemplated hereby, (iii) obtain the Transfer of Environmental
Approvals to Buyer and to obtain all Environmental Approvals necessary for the
consummation of the transaction contemplated hereby, and (iv) obtain the release
of Seller from liability in respect of the Assumed Liabilities as to which
Seller elects to seek such release.
(b) Seller and Buyer shall act diligently and reasonably, and
shall cooperate with each other, subject to paragraph (c) of this Section 6.3,
to secure any consents and approvals of any Governmental Body required to be
obtained by them in order to Transfer any Governmental Permits to Buyer.
(c) Seller agrees to expend such amounts of money, if any, as it
shall reasonably determine to be necessary in its discretion in order to take
the actions described in Section 1.5 and this Section 6.3.
6.4. CONDUCT OF THE BUSINESS PRIOR TO THE CLOSING.
--------------------------------------------
(a) Seller shall operate and carry on the Business only in the
ordinary course as currently operated. Consistent with the foregoing unless
consented to in writing by Buyer which consent shall not be unreasonably
withheld, Seller shall comply with the provisions set forth below:
(i) Seller shall not enter into any contract, commitment or
other agreement providing for payments by Seller in excess of $100,000 over
the term thereof;
(ii) Seller shall not, nor shall it attempt to, sell or agree to
sell or Transfer, or encumber, any interest in the Business or the
Purchased Assets, except in the ordinary course of business;
52
<PAGE>
(iii) Seller shall promptly notify Buyer in writing of, and
furnish to Buyer any information Buyer may request with respect to, the
occurrence of any event or the existence of any state of facts known to
Seller that would result in Seller's representations and warranties not
being true in all material respects if they were made at any time during
the period from the date hereof to the Closing;
(iv) Seller shall use its best efforts to maintain and preserve
the organization of the Business intact, to retain the employees presently
engaged in the Business so that they will be available to Buyer after the
Closing (provided, however, that nothing herein shall change at will
-------- -------
relationships or preclude the employer's rights thereunder) and to maintain
its relationships in all material respects with customers, suppliers and
others so that those relationships will be preserved through the Closing;
(v) Seller shall not grant or agree to grant any general
increase in the rates of salaries or comparable compensation (other than
pursuant to collective bargaining agreements in effect as of the date of
this Agreement) of its employees or agents of the Business whose annual
compensation in either case is at least $50,000;
(vi) Seller shall maintain the Purchased Assets in serviceable
condition or in working order and, in either case, suitable for use in
accordance with the past practices of Seller;
(vii) Seller shall not make any capital expenditures or
commitments therefor, additions or capital improvements in connection with
the Business in excess of $100,000 individually;
(viii) Seller shall pay all trade and other payables consistent
with past practice;
(ix) Seller shall not make any distribution of its assets other
than cash to any Seller Group Member or Affiliate of Seller;
(x) Seller shall not enter into or amend any lease or similar
agreement under which Seller shall be lessee of, or hold or operate, any
real property owned by any Person other than Seller; and
(xi) Seller shall diligently continue to attempt to obtain
indemnification agreements relating to sales made by Licensees to customers
in connection with Seller's nationally and centrally billed accounts.
53
<PAGE>
(b) Except as expressly contemplated hereby, Seller shall not
other than in the ordinary course:
(i) enter into any contract, agreement, undertaking or
commitment which, if in effect on the date hereof, would have been required
to be set forth in Schedules 4.19(a), 4.19(b), 4.20(a), 4.20(b), 4.20(c),
4.20(d), 4.20(f) or 4.20(g)(i); or
(ii) take any action described in Sections 4.5(b)(i) through (xv)
which, if taken between the October Balance Sheet Date and the date of this
Agreement, would have been required to be disclosed in Schedule 4.5(b)
pursuant to the terms of Section 4.5(b).
6.5. ANTITRUST COMPLIANCE, ETC. As promptly as practicable after
--------------------------
the date of this Agreement, Buyer and Seller (or their ultimate parent entities)
shall file with the Federal Trade Commission and the Antitrust Division of the
Department of Justice the notifications and other information required to be
filed under HSR with respect to the transactions contemplated hereby. Each of
Buyer and Seller (or their ultimate parent entities) shall file as promptly as
practicable such additional information as may be requested. Each of Buyer and
Seller shall make available to the other such information in its possession as
may be necessary for the completion of the notifications and other information
to be filed by or on behalf of the other (or their ultimate parent entities).
6.6. FCC COMPLIANCE. (a) Subject to the possible continuance of
--------------
the events referred to in Schedule 4.30, Seller shall maintain all of the
personal property of Seller which transmits or receives radio frequency waves in
conformity in all material respects with all applicable Governmental Rules,
including the FCC Rules. Upon Buyer's request therefor, Seller shall deliver to
Buyer copies of certificates, if any, issued by the FCC to Seller evidencing
Seller's compliance with the FCC Rules.
(b) Seller shall promptly notify Buyer if Seller receives
written notice of (i) any action by or pending before the FCC to revoke, cancel,
rescind or materially modify any Governmental Permits issued by the FCC to
Seller, any of the SCA Lessors or MicroSpace or (ii) any FCC order to show
cause, notice of apparent liability or forfeiture, any complaint against Seller
filed with the FCC, or any written threat thereof. Seller shall use reasonable
efforts to timely protest or seek rescission or withdrawal, in good faith, of
any such action, order, notice or complaint relating to any Governmental Permit
issued to Seller by the FCC. If any of Seller's MAS microwave stations are
operating in a manner that violates FCC Rules, Seller shall use its best efforts
to bring the operation of such stations into compliance
54
<PAGE>
with FCC Rules, provided, that if Seller does not effect such compliance on or
-------- ----
prior to the Closing Date, Seller shall arrange (and Buyer shall cooperate, at
no cost to Buyer, in Seller's arranging) on or prior to the Closing Date for
alternative means to deliver existing services to subscribers who now receive
services via any such non-complying MAS Microwave Stations (the "Alternative"),
provided, that, no such Alternative shall economically adversely affect Buyer
- -------- ----
and/or involve expenses to Buyer greater than those incurred by Seller in
providing such services through any such non-complying MAS Microwave Stations
for which Buyer is not reimbursed or otherwise economically made whole by Seller
on terms reasonably satisfactory to Buyer, which reimbursement and/or making
whole Seller hereby agrees to perform.
(c) Seller shall promptly notify Buyer if Seller receives
written notice (i) that any SCA Lessor operates stations not in conformity with
the Communication Act and the FCC Rules, (ii) of the assignment or license or
transfer of control of the licenses of any of the SCA Lessors, (iii) of any
investigation, notice of violation, order or complaint issued by or before any
Governmental Body, including the FCC, with respect to the SCA Lessors and (iv)
of any other proceedings that could materially or adversely affect the validity
or the continued effectiveness of the FM radio station licenses held by the SCA
Lessors or the leases of MicroSpace for satellite transponder capacity.
(d) As soon as practicable, but in any event no later than seven
(7) business days after the date of this Agreement, Seller and Buyer shall
execute applications (FCC Forms 402 and 1046) (the "FCC Applications") and all
other documents necessary to obtain the consent of the FCC to the assignment of
licenses of the microwave radio stations listed in Schedule 4.30 from Seller to
Buyer (the "FCC Consents").
6.7. EXON-FLORIO. None of the parties shall make a voluntary
-----------
filing under Section 721 of the Defense Production Act of 1950 with respect to
the transactions contemplated hereby without the consent of Seller, in the case
of Buyer, or Buyer, in the case of Seller, TFC or General Partner.
6.8. SELLER'S DISCLOSURE. Seller may from time to time prior to
-------------------
the Closing, by notice in accordance with this Agreement, (x) supplement or
amend any Schedule to this Agreement to correct any representation and warranty
herein contained that was not true when made or (y) otherwise correct any such
representation and warranty that is not made by reference to a Schedule hereto
(any such supplementation or amendment pursuant to clause (x) or correction
pursuant to clause (y) being referred to as a "Disclosure"); provided, that, if
-------- ----
any Disclosure is delivered to Buyer within seven (7) business days of the then
scheduled Closing Date, notwithstanding anything to the contrary
55
<PAGE>
stated in Section 11.1, the Closing Date and, if necessary, the Termination Date
shall be extended for a period of seven (7) business days after the date of such
delivery. To the extent that a Disclosure relates to a matter that occurred or
existed at or prior to the date of this Agreement, no such Disclosure shall be
deemed to correct or to cure any breach of such representation or warranty for
purposes of Article VIII or XI unless such incorrectness or breach is not
material, and Buyer shall be entitled to terminate this Agreement pursuant to
Section 11.1(b)(ii), but Buyer shall only be entitled to the remedy set forth in
Section 11.2(b). To the extent that a Disclosure relates to a matter which
occurs after the date of this Agreement, Buyer shall be entitled to terminate
this Agreement pursuant to Section 11.1(c), but Buyer shall not be entitled to
exercise any of its other rights and remedies hereunder. If the Closing occurs,
any such Disclosure will be effective to cure and correct for all purposes any
incorrectness or breach of any representation or warranty (whether or not
material) which would have existed by reason of Seller's not having made such
Disclosure.
6.9 TAXES. Promptly after the date of this Agreement, but, in
-----
any event, no later than twenty (20) days after the date of this Agreement,
Seller shall deliver to Buyer a statement which shall set forth Seller's
approximate estimated aggregate adjusted tax basis, for U.S. Federal income tax
purposes, in the Purchased Assets as of April 30, 1992.
6.10 PROPRIETARY RIGHTS. As soon as practicable after the date
------------------
of this Agreement, Seller shall deliver letters, reasonably satisfactory to
Buyer, (a) to each Licensee which uses the word "Muzak" as part of its corporate
name instructing such Licensee to cease such use of the word "Muzak" and (b) to
each Licensee which has been using Proprietary Rights without written
authorization stating that such Licensee is, and has at all times been,
authorized to use such Proprietary Rights pursuant to the terms of such
Licensee's License Agreement. Seller agrees to use its reasonable efforts to
cause each such Licensee, prior to the Closing, to acknowledge and agree to the
terms of the letter(s) addressed to it pursuant to this Section 6.10.
ARTICLE VII
ADDITIONAL COVENANTS OF THE PARTIES
-----------------------------------
7.1. COVENANT NOT TO COMPETE. At the Closing Seller, General
-----------------------
Partner, TFC, Marshall Field V and the Trusts shall enter into the Non-
Competition Agreement in the form attached as Exhibit B.
7.2. EXPENSES. Except as otherwise specifically
--------
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provided in this Agreement, (a) Buyer and Seller shall bear their own respective
expenses incurred in connection with this Agreement and in connection with all
obligations required to be performed by each of them under this Agreement and
(b) Seller's expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereunder shall not be a liability
on the Closing Date Balance Sheet.
7.3. PUBLICITY. Prior to the Closing, neither Buyer nor Seller
---------
shall publicize, advertise, announce or describe to any Governmental Body or
other third person the terms of this Agreement, the parties hereto or the
transactions contemplated hereby, except as may be required by law or as
required or permitted pursuant to this Agreement in order to obtain the consent
of any such third person or Governmental Body or to Buyer's lenders and their
advisors or to any third party to enable Buyer or Seller to consummate the
transactions contemplated hereunder. No press release or other public
announcement of any kind concerning the transactions contemplated by this
Agreement shall be made by Buyer or Seller except as counsel for any party
advises is required by law or upon prior written approval (as to form and
content) of the other party, and except that TFC may make such press releases as
it believes are appropriate, subject to prior notice to, and consultation with,
Buyer.
7.4. EMPLOYMENT MATTERS. (a)(i) As of the Closing Date, Buyer
------------------
shall adopt, assume and be solely responsible for the Muzak Limited Partnership
Tempo Savings and Retirement Plan described in Schedule 4.18(b) (the "Savings
Plan") and the liabilities thereunder which accrue from and after the Closing
Date. As of the Closing Date, Buyer will be substituted for Seller as the plan
sponsor under the Savings Plan with full authority to maintain, amend or
terminate the Savings Plan to the extent allowed by law.
(ii) As of the Closing Date, Seller shall assign to Buyer and
Buyer shall assume all of Seller's rights, obligations, title and interest in
the trust fund (the "Trust Fund") and trust agreement (the "Trust Agreement") of
the Savings Plan. At the Closing, Buyer shall be substituted as "employer" under
the Trust Agreement.
(iii) At the Closing, Buyer and Seller shall execute an agreement
of assumption of sponsorship of the Savings Plan and Trust Agreement in such
form as is reasonably satisfactory to the parties hereto.
(iv) Seller shall promptly, after the Closing, supply Buyer with
(A) all records in the possession or control of Seller or its agents, concerning
participation, vesting, accrual of benefits, payment of benefits and elective
forms of benefits
57
<PAGE>
under the Savings Plan and (B) any other information in the possession or
control of Seller or its agents reasonably requested by Buyer that is necessary
or appropriate for the administration of the Savings Plan.
(v) Buyer shall file on behalf of Seller with the IRS on a
timely basis the annual report on Form 5500 for the Savings Plan for the plan
year ending December 31, 1991. Any reasonable out-of-pocket costs incurred in
connection with such filing shall be borne by Seller. Buyer shall file with the
IRS on a timely basis the annual report on Form 5500 for the Savings Plan for
the plan year beginning immediately prior to the Closing Date. Seller and Buyer
shall cooperate in the preparation and filing of said annual report.
(vi) The audited financial statements of the Savings Plan for the
most recent three (3) fiscal years for which such statements have been
completed, attached in Schedule 7.4(a), and certified by Arthur Andersen & Co.,
auditors for the Savings Plan, have been prepared in accordance with GAAP
consistently followed by the Trust Fund throughout the periods indicated and
fairly present the financial position of the Trust Fund as of the respective
dates, the net assets available for benefits, the accumulated plan benefits, the
changes in net assets available for benefits and the changes in accumulated plan
benefits.
(vii) On the Closing Date, Seller shall deliver to Buyer a
certificate dated as of the Closing Date in form and substance reasonably
satisfactory to Buyer's counsel, executed by the proper officers of the trustee
of the Trust Fund (the "Trustee") to the effect that (A) the amount of assets
held by the Trustee to fund benefits under the Savings Plan as of January 31,
1992, as reported by the Trustee of the Savings Plan, was $2,989,014.36; and (B)
such amount has not been withdrawn from the Trust Fund since January 31, 1992
other than for purposes of ordinary benefit payments, participant withdrawals
permitted under the terms of the Savings Plan; payments of lump sum benefits to
employees terminating their employment with Seller and the payment of expenses
permitted under the Plan.
(viii) Prior to the Closing, Seller shall amend and restate the
Savings Plan to conform to all applicable provisions of the requirements of the
Tax Reform Act of 1986 and all subsequent legislation effective before the
Closing and to make changes disclosed in Schedule 4.18(k). Buyer shall be
responsible for filing the amended and restated Savings Plan with the IRS within
the applicable remedial amendment period permitted by applicable Governmental
Rule, and Buyer shall be permitted to make amendments required to receive IRS
approval of the application filed in respect of the Savings Plan, provided that
it shall not be permitted to make any amendments that would increase Seller's
liabilities in respect of the Savings Plan without
58
<PAGE>
Seller's written consent (which shall not be unreasonably withheld) and Seller
shall cooperate in preparation of the application to be filed with the IRS.
(b)(i) As of the Closing Date, Buyer shall adopt, assume and be
solely responsible for all responsibilities and liabilities which accrue as a
result of the rendering of services from and after the Closing Date (including
all continuation coverage elected before, on or after the Closing Date by any
individual pursuant to Section 4908B of the Code and 601 through 608 of ERISA or
other applicable Governmental Rule as a result of an event occurring on or prior
to the Closing Date) under Seller's combined Medical Care/Dental Care/Basic
Life/AD&D Plan/Vision Care Plan, Long Term Disability Plan, its contracts or
agreements with the Harvard Community Health Plan, the Kaiser Foundation Health
Plan, Inc. - Northern Region and the Virginia Mason Health Plan; and the
Business Travel Accident Insurance Plan, the Voluntary Personal Accident Plan,
the Pre-tax Premium Plan, the Group Universal Life Plan, and the Employee
Assistance Program (all of which are referred to collectively as "Health and
Welfare Benefit Program").
(ii) As of the Closing Date, Buyer shall be substituted as the
plan sponsor of the Health and Welfare Benefit Program with full authority to
maintain, amend or terminate the Health and Welfare Benefit Program or any
component part thereof to the extent allowed by law. At the Closing Buyer and
Seller shall execute an agreement of assumption of plan sponsorship in such form
as is reasonably satisfactory to Buyer and Seller. Seller shall promptly after
the Closing Date supply Buyer with (A) all records in the possession or control
of Seller concerning claims and payment of benefits under the Health and Welfare
Program or any component part thereof and (B) any other information in the
possession or control of Seller or its agent that is necessary or appropriate
for the administration of the Health and Welfare Benefit Program or any
component part thereof.
(iii) Seller shall keep, or cause to be kept, all insurance and
HMO coverage listed in Schedule 7.4(b) or which otherwise is used in connection
with the Health and Welfare Benefit Program in full force and effect through the
close of business on the Closing Date. Seller shall provide Buyer with
information and data and the services of its personnel to facilitate and enable
Buyer to arrange for the continuance subsequent to the Closing Date, without
interruption, of all such contracts and insurance coverage presently maintained
by Seller under master group or other policies for or on behalf of the Seller
and/or its employees and, in connection therewith, Seller shall use its best
efforts to assist Buyer in obtaining an assignment of all such existing HMO
contracts and insurance contracts (or if such assignment is unavailable, Seller
shall use its best efforts to assist Buyer in obtaining coverage comparable to
the coverage
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<PAGE>
presently in effect) with (x) no increase in premiums and no adverse impact on
other financial arrangements relating to such coverage, (y) grandfather
provisions for all individuals (including disabled employees, employees on
disability waiver of premium and individuals entitled to COBRA continuation of
health coverage) who have fully or partially satisfied any eligibility, pre-
existing condition, actively at work, deductible, or other conditions and
limitations with respect to any benefit or right under the Health and Welfare
Benefit Program as in effect on the Closing Date, and (z) if a new contract
rather than an assignment is obtained, responsibility, if necessary, on the part
of the new insurer for administering payment of all outstanding reported and
unreported claims under the prior contract. If Buyer is unable to arrange for
such assignment or comparable coverage prior to the Closing Date, Seller shall
maintain, at the expense of Buyer, the presently existing coverage in effect to
the extent permitted by the pertinent policies and contracts and, if not
permitted, seek appropriate endorsements to allow for continuance of such
coverage. Effective upon the Closing, Seller shall relinquish all right, title,
and interest under any such insurance contracts, whether or not assigned to
Buyer, to any reserves for claims incurred prior to the Closing Date (including
unreported claims), or any experience credits or refunds, attributable to, or
relating to, any contributions made by Seller during the period prior to the
Closing Date.
(iv) As soon as practicable, and in any event prior to the
Closing Date, Seller shall (A) file an amended annual report on Form 5500 for
1988 and 1989 for plan number 501 reflecting its Business Travel Accident
Insurance Plan and its Employee Assistance Program and (B) file an amended
annual report on Form 5500 for 1990 for plan number 501 reflecting its Business
Travel Accident Insurance Plan, Employee Assistance Program, Voluntary Personal
Accident Insurance Plan, health maintenance organization, and Pre-Tax Premium
Plan. Seller shall be liable for any penalty imposed by the U.S. Department of
Labor, the U.S. Department of the Treasury and/or the Internal Revenue Service
for failure to have filed a timely or complete Form 5500 annual report due prior
to the Closing Date for its Medical Care/Dental Care/Basic Life/AD&D/Vision Care
Plan, health maintenance organizations, Long-Term Disability Plan, Business
Travel Accident Insurance Plan, Voluntary Personal Accident Insurance Plan,
Group Universal Life Plan, Pre-Tax Premium Plan, Employee Assistance Program,
Vision Care Plan, or any other employee benefit plan offered to its employees.
Seller shall amend page J-3 of its Employee Handbook to list separate plan
numbers for its Group Universal Life Insurance Plan and its Long-Term Disability
Plan.
(v) Buyer shall file on behalf of Seller on a timely basis the
annual report on Form 5500 for the Health and Welfare Benefit Program for the
plan year(s) beginning in 1991
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<PAGE>
and ending prior to the Closing Date. Any reasonable out-of-pocket costs
incurred in connection with such filing shall be borne by Seller. Buyer shall
file on a timely basis the annual report on Form 5500 for the Health and Welfare
Benefit Program for the Plan year beginning prior to the Closing Date and ending
on or after the Closing Date. Seller and Buyer shall cooperate in the
preparation and filing of such annual reports.
(c) On or prior to the Closing Date, Seller shall pay to members
of senior management of Seller any and all amounts due and owing through the
Closing Date as reflected in the Management Investment Plan attached hereto as
Schedule 7.4(c) which shall be terminated as of the Closing.
(d) As of the Closing Date, Buyer shall adopt, assume and be
solely responsible for each Plan identified in Schedule 4.18(b), and related
funding vehicles, which accrue from and after the Closing Date. As of the
Closing Date, Buyer shall be substituted as the plan sponsor of each such Plan
with the full authority to maintain and amend such Plan to the extent allowed by
law, and at the Closing the parties shall execute an agreement of assumption of
plan sponsorship in such form as is reasonably satisfactory to Seller. Buyer
shall file on behalf of Seller on a timely basis the annual report on Form 5500
required to be filed for any such Plan for the plan year(s) beginning in 1991
and ending prior to the Closing Date. Any reasonable out-of-pocket costs
incurred in connection with any such filing shall be borne by Seller. Buyer
shall file on a timely basis the annual report on Form 5500 required for any
plan, agreement or such Plan for the plan years beginning prior to the Closing
Date and ending on or after the Closing Date. Seller and Buyer shall cooperate
in the preparation and filing of such annual reports. The foregoing provisions
of this subsection (d) shall not apply to any Plan referred to in Section 7.4(a)
or 7.4(b) (which such Plans are specifically adopted and assumed by Buyer in
accordance with such Sections), or any Multiemployer Plan, the Management
Investment Plan or any plan, agreement or arrangement listed in Schedule
4.18(g); provided, however, that, with respect to any individual named on
-------- -------
Schedule 4.18(g) who was employed by Seller on or after January 1, 1992, but
whose employment by Seller was terminated prior to the date hereof: (i) Buyer
shall, from and after the Closing Date, pay to each such individual any
remaining payments of salary continuation in the amount set forth in the
agreement or arrangement attached to Schedule 4.18(g) between such individual
and Seller as and when such payment shall be due in accordance with the terms of
such agreement or arrangement reduced by the amount of any applicable Federal,
state and local withholding taxes; provided, that, Buyer shall have no
-------- ----
obligation to make any such payment unless Buyer shall have received payment
from Seller in the amount of the sum of (x) the gross amount to be paid to such
individual (before withholding) and (y) any amounts which Buyer is required to
---
pay as the employer's portion
61
<PAGE>
of any applicable Federal, state and local payroll-based taxes, including
without limitation FICA, FUTA and SUTA, no later than ten days prior to the date
on which any such payment shall be due and Buyer and Seller acknowledge that
such individuals shall only have the right to seek such payments directly from
Buyer if Seller has made such payments to Buyer; and (ii) if any such individual
shall have elected to continue coverage under any "group health plan" (as
defined in Section 4980B(g) of the Code) of Seller named in such agreement then,
for so long as shall be provided under such agreement, Buyer shall pay on behalf
of such individual the amount of premiums agreed upon pursuant to such agreement
and Seller shall reimburse Buyer for the same immediately upon demand therefor.
7.5. W-2 MATTERS. Seller and Buyer agree that, pursuant to the
-----------
"Alternative Procedure" provided in Section 5 of Revenue Procedure 84-77, 1984-2
Cumulative Bulletin 753, with respect to filing and furnishing IRS Forms W-2, W-
3, W-4, W-5 and 941, (a) Seller shall report, and Buyer shall report, on a
"predecessor-successor" basis as set forth therein, (b) Seller shall be relieved
from furnishing Forms W-2 to the employees of Buyer, and (c) Buyer shall assume
the obligations of Seller to furnish Forms W-2 to such employees for the full
1992 calendar year.
7.6. POST-CLOSING REMITTANCES. If, after the Closing Date, (a)
------------------------
Seller or its Affiliates shall receive any remittance from any account debtor
with respect to any accounts or notes receivables included in the Purchased
Assets, Seller or its Affiliates, as applicable, shall endorse such remittance
to the order of Buyer and forward it to Buyer promptly following receipt
thereof, (b) Buyer or its Affiliates shall receive any remittance from any
account debtor not in payment of any accounts or notes receivables included in
the Purchased Assets, or not otherwise payable to Buyer or its Affiliates, then
Buyer or its Affiliates, as applicable, shall endorse such remittance to the
order of Seller and forward it to Seller promptly following receipt thereof, or
(c) Buyer shall receive any amount on account of the German Licensee Shares,
Buyer shall forward to Seller promptly following receipt thereof an amount equal
to the pro rata portion of such amount to which Seller is entitled based on the
portion of the related distribution period during which Seller owned the German
Licensee Shares, subject (upon presentation to Seller of a reasonable statement
thereof) to reduction of such amount by the net amount of Taxes, if any, imposed
on any Buyer Group Member on account of Buyer's receipt thereof; if any Buyer
Group Member thereafter receives a refund of any such Taxes, Buyer shall forward
to Seller the net amount of such refund, provided that the aggregate of such net
amounts so forwarded shall not exceed the amount of the foregoing reduction.
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<PAGE>
7.7. CHANGE IN NAME. Seller agrees that on the Closing Date the
--------------
names of Seller, the General Partner and the Limited Partner shall be changed to
a name that does not include the word "Muzak" or any derivations thereof.
7.8. ACCESS TO RECORDS AFTER CLOSING. (a) For a period of three
-------------------------------
years after the Closing Date, Seller and its Affiliates (in such case to the
extent that Seller is able to cause the Affiliate to do so) shall afford Buyer
and its representatives reasonable access to all the books and records relating
to the Purchased Assets or the Business which Seller or any of its Affiliates
are permitted to retain after the Closing Date. Such access shall be afforded by
Seller and its Affiliates upon receipt of reasonable advance notice and during
normal business hours and shall be had or done in such a manner so as not to
interfere with the normal conduct of business of Seller. Buyer shall have the
right, at its own expense, to make copies of such records. Buyer shall be
responsible for any costs and expenses reasonably incurred by Seller or any
Affiliate thereof in retrieving such books and records at Buyer's request.
However, if Seller or any of its Affiliates shall desire to dispose of any such
books and records prior to the expiration of such three year period, Seller
shall, prior to such disposition, give ninety (90) days' written notice to
Buyer, and Buyer shall have the right at its option and expense to segregate and
remove such books and records as Buyer may elect from those Seller desires to
dispose of within 180 days after the receipt of such notice.
(b) For a period of three years after the Closing Date, Seller
shall make available to Buyer, upon Buyer's written request, (i) Seller's
personnel to assist Buyer in locating and obtaining any undelivered records
which relate, in whole or in part, to the Business maintained by Seller, and
(ii) any of Seller's personnel whose assistance, cooperation or participation is
reasonably required by Buyer for any reason, including, but not limited to, in
connection with the preparation of any tax returns, amended tax returns, refund
claims or similar filings or in connection with the handling of any pending or
threatened tax audits or assessments.
(c) For a period of three years after the Closing Date, Buyer shall
afford Seller and its representatives reasonable access to all the books and
records relating to the Purchased Assets which Buyer or any of its Affiliates
may retain after the Closing Date for matters directly related to (i) a tax
investigation or audit of Seller or (ii) a Claim against Seller as described in
Article X. Such access shall be afforded by Buyer and its Affiliates upon
receipt of reasonable advance notice and during normal business hours and shall
be had or done in such a manner so as not to interfere with the normal conduct
of business of Buyer. Seller shall be responsible for any costs
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<PAGE>
and expenses reasonably incurred by Buyer in retrieving and copying such books
and records at Seller's request. However, if Buyer or any of its Affiliates
shall desire to dispose of any of such books and records prior to the expiration
of such three-year period, Buyer shall, prior to such disposition, give ninety
(90) days' written notice to Seller, and Seller shall have the right at its
option and expense to segregate and remove such books and records as Seller may
select from those Buyer desires to dispose of within 180 days after the receipt
of such notice.
7.9. COOPERATION IN LITIGATION, TAXES AND LICENSING MATTERS.
------------------------------------------------------
Subject to any more specific provisions in Article X, each party shall provide
the other with such cooperation as may reasonably be requested, at the expense
of the requesting party, in connection with (a) the defense of any litigation
relating to the Business whether existing on the Closing Date or arising
thereafter out of, or relating to, an occurrence or event happening before the
Closing Date, (b) Taxes relating to the Business, including Taxes referred to in
Section 7.6(c) and (c) any audit requested by any Licensee conducting or
requesting the same pursuant to any Seller Agreement. Without limiting the
generality of the foregoing, if Seller shall require the benefit of any right,
claim or cause of action referred to in Section 1.1(xii) in order to defend any
Claim pursuant to Section 10.6 or otherwise, Buyer shall Transfer it to Seller
on terms reasonably acceptable to Buyer and Seller or shall enforce it for
Seller's benefit, in each case to the extent reasonably possible. If Buyer
enforces such Claim for the benefit of Seller, Buyer shall be reimbursed by
Seller for its reasonable out-of-pocket expenses in connection therewith.
7.10. MODIFICATION AND PERFORMANCE OF POP AGREEMENT. Until Seller
---------------------------------------------
has received all amounts of money from POP or its Affiliates in consideration of
the sale of the POP Assets pursuant to the POP Agreement and under the POP Sales
Documents, Buyer (x) shall not and shall not agree to (a) cancel or otherwise
modify the amount or timing of receipt of any such amounts by Seller without
Seller's consent, which consent of Seller shall not be unreasonably withheld, or
(b) amend, waive or otherwise modify in any material respect or take or omit to
take any material action under or in respect of any other provision of the POP
Agreement which may affect Seller's rights in respect of the POP Agreement or
the POP Sale Documents without Seller's consent, which consent of Seller shall
not be unreasonably withheld and (y) shall forward promptly to Seller a copy of
each notice under the POP Agreement that relates or potentially relates to any
such amount or right.
7.11. FIRPTA. Seller, General Partner and TFC hereby, jointly and
------
severally, represent that Seller is not a foreign person within the meaning of
Section 1445(b)(2) of the Code, and at the Closing Seller and TFC shall deliver
to Buyer a
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<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
duly sworn affidavit affirming such representation and setting forth the
Seller's taxpayer identification number and such other information required by
Section 1445(b)(2) of the Code and the regulations thereunder.
7.12. INTELLECTUAL PROPERTY ASSIGNMENTS. At the Closing, Seller
---------------------------------
agrees to execute the assignments to Buyer of Seller's Proprietary Rights (the
"Intellectual Property Assignment") in form and substance reasonably
satisfactory to Buyer and Seller and for a period of six (6) months thereafter
(and for an additional period of three (3) years thereafter at Buyer's expense)
to execute thereafter such confirmatory assignments as may be needed to record
in the United States Patent, Trademark and Copyright Offices and in the foreign
countries in which Seller conducts the Business the Transfer to Buyer of
Seller's rights and licenses in and to the Proprietary Rights.
7.13. CONFIDENTIALITY. Except as permitted or contemplated by this
---------------
Agreement or as required by law, Seller shall and shall cause each Seller Group
Member to treat and safeguard as confidential and secret all Protected
Information (as hereinafter defined) and Seller shall not nor shall it permit
any of its Affiliates to use or disclose, furnish or make accessible to any
person any Protected Information, except as required by law or as permitted
under this Agreement. For purposes of this Section 7.13, the term "Protected
Information" shall mean trade secrets, confidential or proprietary information,
knowledge, or know-how pertaining primarily to the Business or any confidential
or proprietary information concerning any customer, including, without
limitation, customer lists, research and development information and materials,
inventions, formulas, methods, techniques, processes, plans procedures,
contracts, financial information and computer models. For purposes of this
Section 7.13, confidential information shall not include any information which
is at the time of its disclosure by Seller in the public domain other than as a
result of any breach by Seller of this Section 7.13.
7.14. [**]. With respect to Seller's receipt of the [**], the
parties hereto agree that: (a) Seller's capital account with respect to such
interest shall be credited with the sum of $5,000,000, representing the agreed-
upon fair market value of the assets transferred to Buyer in consideration
therefor; (b) to the extent of any book-tax disparity resulting therefrom, the
partnership agreement of Buyer shall provide for Code Section 704(c)-type
allocations of items of income, gain, loss and deduction so as to eliminate such
book-tax disparity as quickly as possible; (c) an amount equal to any increase
in the liquidation preference of the [**] pursuant to the Amended Partnership
Agreement shall be accrued and deducted by Buyer, and shall be included in
income by Seller,
65
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
as a guaranteed payment for the use of capital under Section 707(c) of the Code;
(d) the [**] shall not constitute an interest in partnership profits, and Seller
shall not be allocated any profits or losses of Buyer; and (e) payments made to
redeem the [**] shall be treated as payments described in Section 736(b) of the
Code to the extent not in excess of $5,000,000, and as guaranteed payments for
the use of capital as to any excess.
7.15. FURTHER ASSURANCES. Subject to Section 1.5 and 6.3 and any
------------------
other provision hereof dealing more specifically with the Transfer of the
Purchased Assets, (a) on the Closing Date Seller shall (i) deliver to Buyer such
other bills of sale, deeds, endorsements, assignments and other good and
sufficient instruments of conveyance and transfer, in form reasonably
satisfactory to Buyer and its counsel, as Buyer may reasonably request or as may
be otherwise reasonably necessary to vest in Buyer all the right, title and
interest of Seller in, to or under any or all the Purchased Assets (including
without limitation as to each of the leases or similar agreements listed in
Schedule 7.15 under which Seller is lessee of, or holds or operates, any real
property owned by any Person other than Seller the following (which Seller shall
use its best efforts to obtain, provided that Seller shall not be obligated to
spend any money other than miscellaneous and minor administrative expenses to
provide the following): (x) an estoppel certificate identifying the lease and
stating that such lease is in full force and effect, that Seller is current in
all its obligations under such lease and that the lessor is not aware of any
default by Seller under such lease and (y) an agreement from the lessor that it
will pay to Buyer any deposit made pursuant to the lease in accordance with the
terms and conditions of the lease) and (ii) take all steps as may be necessary
to put Buyer in actual possession and control of all such Purchased Assets
required to be Transferred to Buyer, and (b) from time to time following the
Closing until the sixth anniversary thereof, Seller shall execute and deliver,
or cause to be executed and delivered, to Buyer such other instruments of
Transfer as Buyer may request or as may be otherwise necessary to more
effectively Transfer to, and vest in, Buyer and put Buyer in possession of, any
part of such Purchased Assets.
7.16. CASH AVAILABLE FOR CHECKS; RIGHT OF ENDORSEMENT; POWER OF
---------------------------------------------------------
ATTORNEY. From and after the Closing, Seller shall retain sufficient cash in
- --------
its checking accounts to cover any obligations of Seller pursuant to checks
written by Seller prior to the Closing in respect of the Purchased Assets. After
the Closing, Buyer shall have the right and authority to endorse, without
recourse, the name of Seller on any check or any other evidence of indebtedness
received by Buyer on account of any Purchased Asset, and Seller shall deliver to
Buyer at the Closing copies of such documents, certified by Seller, sufficient
to permit Buyer to deposit such checks or other evidences of
66
<PAGE>
indebtedness in bank accounts in the name of Buyer. In addition, Seller shall
constitute and appoint Buyer the true and lawful attorney of Seller, with full
power of substitution, in the name of Seller or in the name of Buyer, at the
expense of Seller (but only to the extent such expenses are reasonable) but for
the benefit of Buyer, to collect, assert or enforce any claim, right or title of
any kind in or to the Purchased Assets, to institute and prosecute all actions,
suits and proceedings which Buyer may deem proper in order to collect, assert or
enforce any such claim, right or title, to defend and compromise all actions,
suits and proceedings in respect of any of the Purchased Assets, and to do all
such acts and things in relation thereto as Buyer shall deem advisable (in each
case subject to any other specifically applicable provision hereof). Seller
acknowledges that (subject as aforesaid) such powers are coupled with an
interest and shall not be revocable by it in any manner or for any reason,
including, without limitation, the liquidation or dissolution of Seller, and
that Buyer shall be entitled to retain for its own account any amounts collected
pursuant to such powers, including any amounts payable as interest in respect
thereof. Such powers shall be granted by such powers of attorney and other
instruments as shall be reasonably requested by Buyer.
7.17. BULK SALES; LOCATION OF INVENTORY. Seller shall execute and
----------------------------------
deliver such documents and information as shall be necessary, and will otherwise
cooperate with and assist Buyer, to comply with such applicable laws and
procedures regarding bulk transfers as Buyer shall request at the expense of
Buyer. At the Closing Seller shall certify to Buyer that Seller does not own or
hold any inventory in any states other than the states that shall be set forth
in a prior certificate, which certificate shall be delivered by Seller to Buyer
no later than seven business days after the date hereof and which shall state
that the information set forth therein constitutes a representation and warranty
hereunder.
7.18. PURCHASE PRICE ESCROW. At the Closing, Seller and Buyer shall
---------------------
enter into an escrow agreement in the form attached hereto as Exhibit D with an
escrow agent reasonably acceptable to each of Buyer and Seller, and Seller shall
deposit $250,000 of the Purchase Price with the escrow agent pursuant thereto.
7.19. ENVIRONMENTAL MATTERS. If, after the Closing Date, Buyer
---------------------
becomes aware of any violation of Environmental Laws in respect of the Purchased
Assets which arises from events which occurred prior to the Closing Date, Buyer
shall give notice to Seller of such violation promptly after Buyer becomes aware
of such violation. Buyer shall afford Seller and its representatives reasonable
access to the Facility or Facilities where such violation has occurred to permit
Seller at Seller's election to attempt to remedy such violation at the sole
expense
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<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
of Seller. Seller may request that Buyer remedy such violation on behalf of
Seller at Seller's expense; provided, however, that Buyer shall not be required
-------- -------
to take any action that it reasonably believes will expose it to liability for
which it is not adequately indemnified (and Buyer may request an indemnity in
form and substance satisfactory to the Buyer relating to Buyer's effort to
remedy such violation on behalf of Buyer). Such access shall be afforded by
Buyer upon reasonable advance notice and during normal business hours and shall
be had or done in such a manner so as not to interfere with the normal conduct
of business of Buyer.
7.20. PERMITTED PAYMENTS. So long as any Permitted Payments (as
------------------
defined below) are payable, Buyer shall not enter into any agreement or other
obligation (or any amendment of an existing agreement or other obligation) that
expressly prohibits (as described below) the redemption of the [**] (in
accordance with the terms of the Amended Partnership Agreement), the payment of
the Earn-Out Payment (in accordance with the terms of this Agreement) or the
repayment of the [**] or the Earn-Out Notes (in accordance with their terms)
(collectively, the "Permitted Payments"); provided, that nothing contained in
--------
this Section 7.20 shall be construed as prohibiting Buyer from: (a) entering
into agreements pursuant to the commitments for debt financing set forth in
Schedule 5.5; (b) entering into agreements or other obligations, including
agreements providing for the refinancing of the debt financing referred to in
clause (a), prohibiting a Permitted Payment prior to stated maturity or
prohibiting a Permitted Payment at or after stated maturity if the prohibition
is triggered by (i) the existence of a default or an event of default under the
agreement or (ii) the fact that a default or an event of default would exist or
be declarable under such agreement after giving effect to such Permitted Payment
(other than any such default or event of default that solely arises out of a
breach of a covenant that expressly prohibits the Permitted Payment); or (c)
issuing and thereafter redeeming, repurchasing or retiring securities senior to
the [**], the Earn-Out Payment or the Earn-Out Notes (but otherwise complying
with this Section 7.20).
7.21. AMENDED PARTNERSHIP AGREEMENT. At the Closing Seller shall
-----------------------------
enter into, and Buyer shall cause MLP Acquisition to enter into, an amended and
restated partnership agreement of Buyer (the "Amended Partnership Agreement") in
the form of Exhibit E with such changes as Buyer reasonably shall request,
provided, that, such changes shall not in any respect adversely affect the
- -------- ----
rights of Seller thereunder other than as contemplated by the agreements to be
entered into pursuant to the commitments for debt financing set forth in
Schedule 5.5.
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<PAGE>
7.22. NON-SOLICITATION. If the Closing does not occur, neither
----------------
Buyer nor any of its Affiliates shall, for a period of two years after the date
of this Agreement, without the prior written approval of Seller, directly or
indirectly solicit, induce or attempt to persuade any Person who is an employee
of Seller or any of its Affiliates on the date of this Agreement or at any time
hereafter prior to the end of such two-year period, to terminate his or her
employment with Seller or its Affiliates. Without limiting the right of Seller
to pursue all other legal and equitable rights available for a violation of this
Section 7.22 by Buyer or its Affiliates, it is agreed that other remedies cannot
fully compensate Seller for such a violation and that Seller shall be entitled
to injunctive relief to prevent a violation or continuing violation hereof. It
is the intent and understanding of each party hereto that if, in any action
before any court or agency legally empowered to enforce this Section 7.22, any
term, restriction, covenant or promise in this Section 7.22 is found to be
unreasonable and for that reason unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such court or agency.
7.23. EMPLOYEES. Effective on the Closing Date, Buyer shall offer to
---------
each employee employed in the Business (whether or not on leave) employment with
Buyer in substantially the same capacity in which such employees had been
employed, and with substantially the same base compensation as such employees
had received immediately prior to the Closing Date; provided, however, that
-------- -------
nothing herein shall change at will relationships to any other type of
relationship or preclude the employer's rights thereunder.
If Buyer shall terminate the employment of any individual named in Schedule
7.23 for any reason other than cause within ninety (90) days after the Closing
Date, Buyer shall notify Seller of such termination in writing within ten (10)
days following such termination, which notice shall state the determination of
the President of Buyer as to whether such termination was for any reason other
than cause (as defined below). If such notice states that such termination was
for any reason other than cause, Buyer shall pay to such terminated individual,
as of the last business day of each month beginning in the month following such
termination, but only for the number of months set forth in Schedule 7.23 with
respect to such individual, an amount equal to any amount Buyer shall have
received from Seller not later than ten (10) days prior to such date with
respect to such individual; provided, that, any payment by Buyer to any such
-------- ----
terminated individual shall be reduced by the amount of any applicable Federal,
state and local withholding taxes and shall be further reduced by any amounts
which Buyer is required to pay as the employer's portion of any applicable
Federal, state and local payroll-based taxes, including without
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limitation FICA, FUTA and SUTA, and Buyer and Seller acknowledge that such
individuals shall only have the right to seek such payments directly from Buyer
if Seller has made such payments to Buyer. If such notice states that such
termination was for any reason other than cause and if any such individual shall
elect to continue coverage under any "group health plan" (as defined in Section
4980B(g) of the Code) of Buyer, then, for so long as such individual shall be
entitled to coverage under such group health plan pursuant to Section 4980B of
the Code and Sections 601 through 608 of ERISA (but in no event for a period of
months following Buyer's termination of such individual's employment which is
greater than the period of months set forth in Schedule 7.23), Buyer shall pay
on behalf of such individual the portion of the premium that represents the
employer contributions applicable to such coverage, and Seller shall reimburse
Buyer for the same immediately upon demand therefor accompanied by reasonable
documentation. If such notice states that such termination was for any reason
other than cause and if any such individual shall elect to continue coverage
under Buyer's Basic Life/Accidental Death and Dismemberment Plan as then in
effect, and if the terms of such Plan shall permit such election, then, for the
number of months following Buyer's termination of such individual's employment
as is set forth in Schedule 7.23, Buyer shall pay on behalf of such individual
the portion of the premium that represents the employer contributions applicable
to coverage under such Plan, and Seller shall reimburse Buyer for the same
immediately upon demand therefor. For the purposes of this Section 7.23, the
term "cause" shall have the meaning ascribed thereto in Section 9(c) of the
Management Option Plan. The determination of the President of Buyer that the
termination of employment of an individual named in Schedule 7.23 was or was not
for any reason other than cause shall be made in the sole and absolute
discretion of such President and shall be binding on Seller for purposes of this
Section 7.23.
7.24. NO CONTEST. On and after the Closing Date, Seller shall not
----------
directly or indirectly test the validity of any Patent, Trademark and
Intellectual Property Right or disclose to any third party any Technical
Information which is proprietary in the form of a trade secret, except such
disclosure as may be required by Governmental Rule or as may be necessary to
comply with any obligations or enforce any rights under Article X.
7.25. DISCHARGE OF CERTAIN SELLER OBLIGATIONS. At the Closing
---------------------------------------
Seller shall pay or otherwise discharge all of its indebtedness and liabilities
(including without limitation indebtedness and liabilities to any Seller Group
Member) other than (i) Assumed Liabilities and (ii) liabilities which are
contingent or the amount of which is not then fixed or calculable; provided,
--------
however, that the obligation of Seller set forth in this Section 7.25 shall not
- -------
apply to any contractual obligation arising after the Closing which is not an
Assumed
70
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Liability solely by reason of the provisions of Section 1.5.
7.26. MANAGEMENT AGREEMENTS. At the Closing Seller shall cause the
---------------------
termination of all management contracts or agreements for intercompany services
being provided by, or to, Seller.
7.27. SUBORDINATION AGREEMENTS. At the Closing Buyer and Seller
------------------------
shall execute and deliver to Buyer's lenders party thereto agreements of
subordination substantially in the forms of Exhibits F-1 and F-2.
7.28. CONTINUING EXISTENCE OF SELLER. From the Closing Date until
------------------------------
the second anniversary of the Closing Date, Seller shall not wind-up, dissolve
or otherwise terminate its existence.
7.29. FCC COMPLIANCE. If the FCC Consents have not been issued by
--------------
the Closing Date, then, consistent with Section 94.17 of the FCC Rules, at the
Closing, Seller and Buyer shall execute long term leases for each of the
licensed microwave radio stations listed in Schedule 4.30 for which FCC Consents
have not been issued. Each such lease shall be in form and substance reasonably
satisfactory to Buyer and Seller and shall provide (i) for rental payments of $1
per month from Buyer to Seller and (ii) the purchase by Buyer of the licensed
microwave radio station covered by such lease for the purchase price of $1 upon
the issuance of such FCC Consent.
7.30. GERMAN LICENSEE SHARES. If the German Licensee Shares were
----------------------
not Transferred by Seller to Buyer at the Closing, Buyer shall purchase the
German Licensee Shares from Seller for a purchase price of $720,000 as soon as
practicable after the restrictions on the Transfer of the German Licensee Shares
have been removed, provided, that, (i) Buyer is provided with appropriate
-------- ----
evidence that such restrictions have been removed, (ii) Buyer shall receive from
Seller a certificate representing that each of the representations and
warranties of Seller contained in this Agreement relating to the German Licensee
Shares is true and correct on the date of such purchase as though made on the
date of such purchase and (iii) appropriate notarial forms of Transfer of the
German Licensee Shares are delivered to Buyer. If neither the Transfer nor the
purchase referred to in the preceding sentence occurs and the restrictions on
the Transfer of the German Licensee Shares result in the Transfer of the German
Licensee Shares to one or more other stockholders of the German Licensee ("ROFR
Transfer") for an amount of consideration ("ROFR Consideration") less than
$720,000, then Buyer shall pay to Seller, promptly upon demand therefor
accompanied by reasonable documentation, the lesser of (x) $720,000 minus the
ROFR Consideration and (y) $220,000; provided, however, that it shall be a
-------- -------
condition to Buyer's obligation to
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<PAGE>
pay such amount that Buyer shall have consented to the consummation of the ROFR
Transfer in light of the amount of the ROFR Consideration, such consent not to
be unreasonably withheld or delayed.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
--------------------------------------------
The obligations of Buyer to consummate the transactions contemplated
hereby shall be subject to the satisfaction, on or prior to the Closing Date of
the following conditions (any or all of which may be waived by Buyer):
8.1. NO MISREPRESENTATIONS OR BREACH OF COVENANTS. There shall
--------------------------------------------
have been no material breach by Seller in the performance of any of its
covenants and agreements herein required to be performed by Seller in whole or
in part on or prior to the Closing Date which shall not have been remedied or
cured prior to the Closing Date; each of the representations and warranties of
Seller, General Partner and TFC contained herein shall in all material respects
be true and correct on the Closing Date as though made on the Closing Date
(subject to Section 6.8 and except (i) to the extent that they expressly relate
to an earlier date or (ii) as expressly contemplated by or for changes permitted
by this Agreement); and there shall have been delivered to Buyer certificates to
such effect, dated the Closing Date, signed by the President or any Vice
President of the General Partner on behalf of Seller and itself and by the
President or Vice President of TFC on behalf of TFC.
8.2. NO MATERIAL ADVERSE CHANGE. Between the date of this
--------------------------
Agreement and the Closing Date, except for any change in general economic
conditions, there shall have been no material adverse change in the Purchased
Assets taken as a whole, the Business or the operations or financial condition
of Seller; and there shall have been delivered to Buyer certificates to such
effect, dated the Closing Date, signed by the President and itself or any Vice
President of the General Partner on behalf of Seller and by the President or
Vice President of TFC on behalf of TFC.
8.3. AUTHORIZING ACTION. Seller shall have taken all partnership
------------------
action necessary to approve the transactions contemplated hereby. General
Partner and TFC shall have taken all corporate action necessary to approve the
transactions contemplated hereby.
8.4. NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
----------------------------------------
investigation or inquiry or other proceeding by any Governmental Body shall have
been instituted and be pending, or Governmental Rule issued, preventing the
consummation of the
72
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transactions contemplated by this Agreement or which materially and adversely
affects this Agreement or the rights of the parties hereunder or which questions
the validity or legality of the transactions contemplated hereby.
8.5. NO INJUNCTION. There shall be no effective injunction, writ,
-------------
preliminary restraining order or any order of any nature issued by a court of
competent jurisdiction directing that the transactions provided for herein or
any of them not be consummated as so provided.
8.6. NECESSARY GOVERNMENTAL APPROVALS. Buyer shall have received
--------------------------------
all approvals and actions of or by all Governmental Bodies which are necessary
to consummate the transactions contemplated hereby (including expiration or
termination of the applicable waiting period under HSR).
8.7. RELEASE OF ENCUMBRANCES. Any and all documents necessary to
-----------------------
procure the release of any Encumbrance (other than Permitted Encumbrances) on
the Purchased Assets, including the Encumbrances securing Seller's obligations
for borrowed money, shall have been delivered to Buyer.
8.8. CONSENTS. Seller shall have delivered, or caused to be
--------
delivered, all consents, waivers or approvals relating to the Transfer to Buyer
of (a) the Contracts and the Proprietary Rights which are specified in Schedule
8.8 and (b) the Governmental Permits which are specified in Schedule 8.8.
8.9. SELLER DELIVERIES. Seller shall have executed and delivered
-----------------
to Buyer (i) instruments of transfer, Transferring to Buyer all of the Purchased
Assets to be Transferred at the Closing in accordance with the applicable
provisions of this Agreement, (ii) the Non-Competition Agreement and (iii) the
Amended Partnership Agreement and all other documents required hereby to be
delivered by Seller on or before the Closing Date.
8.10. FINANCING. Buyer shall have received the proceeds of loans on
---------
terms satisfactory to it sufficient to consummate the transactions contemplated
hereby.
8.11. [RESERVED]
8.12. CERTIFICATES. Seller shall have furnished Buyer with such
------------
certificates of the officers of General Partner, TFC and others to evidence
compliance with the conditions set forth in this Article VIII.
8.13. OPINIONS OF COUNSEL. Buyer shall have been furnished with
-------------------
opinions of Sidley & Austin (which may rely as to matters of Delaware law on an
opinion of Potter Anderson &
73
<PAGE>
Corroon) and Heller, Ehrman, White & McAuliffe, all of which opinions shall
state that they may be relied on by any of Buyer's bank lenders if requested by
such lenders, in such forms as shall be reasonably acceptable to Buyer.
8.14. SUBORDINATION AGREEMENTS. Seller shall have executed and
------------------------
delivered to Buyer's lenders party thereto an agreement of subordination
substantially in the form of Exhibits F-1 and F-2.
8.15. TAXES. The dollar amount projected by Arthur Andersen & Co.
-----
to be the aggregate estimated adjusted tax basis, for U.S. income tax purposes,
of Seller in the Purchased Assets as of April 30, 1992, as reflected in the
statement referred to in Section 6.9, shall be not less than $60,000,000.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
---------------------------------------------
The obligations of Seller to consummate the transactions contemplated
hereby shall, at the option of Seller, be subject to the satisfaction, on or
prior to the Closing Date of the following conditions (any or all of which may
be waived by Seller):
9.1. NO MISREPRESENTATION OR BREACH OF COVENANTS. There shall have
-------------------------------------------
been no breach by Buyer in the performance in any material respect of any of its
covenants and agreements herein required to be performed by Buyer in whole or in
part on or prior to the Closing Date which shall not have been remedied or cured
prior to the Closing Date; each of the representations and warranties of Buyer
contained herein shall in all material respects be true and correct on the
Closing Date as though made on the Closing Date (except (i) to the extent that
they expressly relate to an earlier date or (ii) as expressly contemplated by or
for changes permitted by this Agreement); and there shall have been delivered to
Seller a certificate to such effect, dated the Closing Date and signed on behalf
of Buyer by MLP Acquisition.
9.2. AUTHORIZING ACTION. Buyer shall have taken all partnership
------------------
action necessary to approve the transactions contemplated hereby.
9.3. NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
----------------------------------------
investigation, inquiry or other proceeding by any Governmental Body shall have
been instituted and be pending, or Governmental Rule issued, preventing the
consummation of the transactions contemplated by this Agreement or which
materially and adversely affects this Agreement or the rights of the parties
hereunder or which questions the validity or legality of the transactions
contemplated hereby.
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9.4. NO INJUNCTION. There shall be no effective injunction, writ,
-------------
preliminary restraining order or any order of any nature issued by a court of
competent jurisdiction directing that the transactions provided for herein or
any of them not be consummated as so provided.
9.5. BUYER DELIVERIES. Buyer shall have executed and delivered to
----------------
Seller the Assumption Agreement, all other documents required hereby to be
delivered by Buyer on or before the Closing Date and a certificate of limited
partnership reflecting the Amended Partnership Agreement.
9.6. NECESSARY GOVERNMENTAL APPROVALS. Seller shall have received
--------------------------------
all approvals and actions of or by all Governmental Bodies which are necessary
to consummate the transactions contem plated hereby (including expiration or
termination of the applicable waiting period under HSR).
9.7. CERTIFICATES. (a) Buyer shall have furnished Seller with such
------------
certificates of MLP Acquisition and others to evidence compliance with the
conditions set forth in this Article IX.
(b) Seller shall have been delivered certificates substantially in
the form of Exhibit G from each of Wally Borgeson, Dick Chaffee, Jack Craig, Bob
Crowe, Bruce Funkhouser, Tom Gentry, Jim Harrison, John Jester, Mike Murray,
John Neal and Dale Stewart, confirming the continued accuracy of the
certificates delivered by them in connection with the execution of this
Agreement.
9.8. OPINION OF COUNSEL. Seller shall have been furnished with an
------------------
opinion of Rosenman & Colin, in such form as shall be reasonably acceptable to
Seller.
9.9. SOLVENCY. Seller shall have received a copy of any solvency
--------
certificate provided to Buyer's lenders in connection with the transactions
contemplated by this Agreement; provided, that, if no such certificate is
-------- ----
provided to Buyer's lenders, Seller shall have received a certificate of the
Chief Financial Officer of Buyer (which shall be without recourse or liability
to such Chief Financial Officer) stating that, immediately after the Closing
Date and after giving effect to the transactions contemplated by this Agreement,
Buyer will not (a) be insolvent (because its financial condition is such that
the sum of its debts is greater than the fair value of its assets), (b) have
unreasonably small capital with which to engage in its business or (c) have
incurred debts beyond its ability to pay as they become due.
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<PAGE>
9.10. TERMS OF DEBT FINANCING. The terms of the definitive
-----------------------
agreements providing for the senior bank financing and the senior subordinated
financing for the transactions contemplated by this Agreement shall be in
compliance with the commitments for such financing referred to in Section 5.5 of
this Agreement with respect to the rights of Seller in respect of the Earn-Out
Payment, the Earn-Out Notes, the Priority Partnership Interest and the Exchange
Notes.
9.11. MANAGEMENT PLANS. The terms of any definitive management or
----------------
other incentive plan for management employees of Buyer to own or purchase any
interests in Buyer or to receive any incentive, performance-based, equity-linked
or similar payments shall be in compliance with the terms for any such plan
described in Schedule 5.5 with respect to the rights of Seller in respect of, or
in relation to the payment of, the Earn-Out Payment, the Earn-Out Notes, the
Priority Partnership Interest and the Exchange Notes.
9.12. RELEASES. Seller shall have received a release of liability
--------
in respect of prior compensation in form and substance reasonably satisfactory
to Seller from each officer referred to in Section 9.7(b).
ARTICLE X
INDEMNIFICATION
---------------
10.1. SURVIVAL OF INDEMNIFICATION. The indemnification provided for
---------------------------
in Sections 10.2 and 10.3 shall terminate two years after the Closing Date (and
no claims shall be made by any Indemnitee thereafter) except that the
indemnification shall continue as to:
(a)(i) the representations and warranties contained in Sections 4.1,
4.3, 5.1 and 5.2 and the second sentence of Section 4.13 without limitation
and (ii) the representations and warranties contained in Sections 4.7 and
4.17 for the applicable statute of limitations period;
(b) each covenant of any party hereto (other than any relating to a
representation or warranty of such party) set forth herein or in any Buyer
Ancillary Agreement or Seller Ancillary Agreement, until the earliest to
occur of (A) thirty (30) days after the expiration of the time period
during which such covenant or agreement is by its terms performable by the
party obligated by such covenant or agreement, (B) the sixth anniversary of
the Closing Date and (C) the expiration of any applicable statute of
limitations;
(c)(i) the failure of Seller to pay, perform or discharge any of the
Excluded Liabilities in accordance with
76
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
the terms thereof or the failure of Buyer to pay, perform or discharge any
of the Assumed Liabilities in accordance with the terms thereof, as the
case may be, until the expiration of any applicable statute of limitations,
and (ii) any claim referred to in Section 10.2(d) until none of the Earn-
Out Payment, the Earn-Out Notes, the [**] are outstanding; and
(d) any claim for indemnification as to which an Indemnitee (as
hereinafter defined) has given notice to an Indemnitor (as hereinafter
defined) in accordance with this Article X on or prior to the date on which
the period for indemnification would otherwise terminate in accordance with
this Section 10.1 until the liability of the Indemnitor shall have been
determined pursuant to this Article X and the Indemnitor shall have
reimbursed all Indemnitees the full amount required to be indemnified
pursuant to this Article X.
10.2. INDEMNIFICATION BY SELLER. Seller, General Partner and TFC,
-------------------------
jointly and severally, shall indemnify and hold harmless each Buyer Group Member
from and against any and all losses, obligations, liabilities, settlement
payments, awards, judgments, fines, penalties, damages, deficiencies and
reasonable expenses and costs, including reasonable attorneys' fees (and any
reasonable expert's fees) and court costs (collectively, "Damages"; provided,
--------
that, in calculating Damages, there shall be deducted any insurance recovery in
- ----
respect thereof (and the Indemnitee shall in good faith use reasonable efforts
to obtain such recovery) and no right of subrogation shall be permitted to
accrue hereunder to any insurer) incurred by such Buyer Group Member arising
from:
(a) any breach, or failure to perform, by Seller, General Partner
or TFC of any of its covenants or other obligations herein or in any Seller
Ancillary Agreement;
(b) any breach of any representation or warranty of Seller, General
Partner or TFC, contained or referred to herein or any schedule,
certificate, exhibit or other instrument delivered by or on behalf of
Seller pursuant hereto;
(c) any failure of Seller to pay, perform or discharge any of (i)
the Excluded Liabilities in accordance with the terms thereof or (ii) the
obligations of Seller under the contracts or other agreements relating to
such Excluded Liabilities, whether or not disclosed in this Agreement or in
any Schedule or Exhibit hereto; or
(d) any claim by a Holder (as defined herein, in Section 16.03 of
the Amended Partnership Agreement, in
77
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The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
paragraph 9 of the Earn-Out Notes or in paragraph 8 of the [**]) for non
payment of any such "Interest" (as defined in such instrument) in
circumstances in which the related payment was properly delivered to a
Designee (as so defined) and was not delivered to and/or properly applied
by the Designee as among the Holders.
10.3. INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold
------------------------
harmless each Seller Group Member from and against any and all Damages (subject
to the proviso to the definition thereof) incurred by such Seller Group Member
arising from:
(a) any breach, or failure to perform, by Buyer of any of its
covenants or other obligations herein or in any Buyer Ancillary Agreement;
(b) any breach of any representation or warranty of Buyer contained
or referred to herein or in any schedule, certificate, exhibit or other
instrument delivered by or on behalf of Buyer pursuant hereto;
(c) any failure of Buyer to pay, perform or discharge any of (i)
the Assumed Liabilities in accordance with the terms thereof or (ii) the
obligations of Buyer under the contracts or other agreements relating to
such Assumed Liabilities; or
(d) any action of Buyer that causes liability under, or associated
with, the Warn Act to be assessed or otherwise imputed to Seller.
10.4. LIMITATION ON AMOUNT OF INDEMNIFICATION. Notwithstanding
---------------------------------------
anything to the contrary set forth in this Article X, (a) other than Damages
arising from (i) a breach, or failure to perform, by Seller of any of its
covenants pursuant to Sections 1.7, 6.6, 7.4 or 7.29, (ii) the breach of any
representation or warranty of Seller contained in Sections 4.3(a), 4.3(b),
4.3(d), 4.3(e), 4.3(g), 4.3(h), 4.7(a), 4.17, 4.18 or 4.30, the proviso
contained in the second sentence of Section 4.13, (iii) claims referred to in
Section 10.2(d) or (iv) the failure of Seller to pay, perform and discharge any
of the Excluded Liabilities, no Buyer Group Member shall be entitled to
indemnification until the aggregate amount of Damages payable to Buyer Group
Members (without giving effect to this limitation) exceeds $550,000; provided,
--------
that, if the aggregate amount of such Damages exceeds $550,000, indemnification
- ----
shall be made to the full extent of any such Damages in excess of $275,000,
including any such Damages that arose prior to the time that the aggregate of
such Damages exceeded $275,000, and (b) no Buyer Group Member shall be entitled
to indemnification to the extent that the amount of such indemnification,
together with the amounts of indemnification theretofore and concurrently made
to all Buyer Group Members in the aggregate, would exceed $17,000,000;
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<PAGE>
provided, that, this limitation shall not apply to claims referred to in Section
- -------- ----
10.2(d). Any amounts paid to Buyer pursuant to the escrow agreement described
in Section 7.18 (but only to the extent of amounts paid to Buyer in respect of
Damages) or the Setoff Procedure shall be deemed to be Damages for purposes of
the limitations on indemnification set forth in this Section 10.4.
10.5. NOTICE OF CLAIMS. Any Buyer Group Member or Seller Group
----------------
Member ("Indemnitee") seeking indemnification hereunder shall give to the party
or parties obligated to provide indemnification to such Indemnitee
("Indemnitor") a notice ("Claim Notice") describing in reasonable detail the
facts giving rise to any claim for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of computation of
the amount of such claim, and a reference to the provision of this Agreement or
any other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based.
10.6. THIRD PARTY CLAIMS. In the event of any third party claim,
------------------
deficiency or demand asserted or any action commenced or notice given of any
audit, administrative or other proceeding against an Indemnitee ("Claim") as to
which indemnification may be sought from an Indemnitor, the Indemnitee shall
promptly deliver a Claim Notice to the Indemnitor; provided, however, that the
-------- -------
failure by the Indemnitee to give such prompt notice shall not release the
Indemnitor of its indemnification obligations hereunder, except to the extent
such failure prejudices the Indemnitor. The Indemnitor shall be entitled to
participate in and assume the defense of any Claim if the Indemnitor shall agree
in writing within 15 days after receipt of such Claim Notice that it is
required, pursuant to this Article X, to indemnify the Indemnitee for the full
amount of such Claim (the "Claim Acknowledgement Procedure"), provided, that,
-------- ----
Indemnitor's compliance with the Claim Acknowledgement Procedure shall not
preclude the Indemnitor from exercising any right it may otherwise have
hereunder or under any Buyer Ancillary Agreement or Seller Ancillary Agreement
against the Indemnitee. If the Indemnitor assumes the defense of any such Claim,
the Indemnitee shall cooperate with the Indemnitor in connection therewith, and
the Indemnitee shall be kept informed with respect to, and shall have the right
to participate in, the contest, defense, settlement or compromise of any such
Claim. If the Indemnitor does not assume the defense of any such Claim or does
not comply with the Claim Acknowledgement Procedure, the Indemnitee shall be
entitled to conduct the defense of such Claim at Indemnitor's expense. In any
case, neither the Indemnitor nor the Indemnitee shall settle or compromise any
such Claim without the prior written consent of the other party or parties, as
the case may be, which consent shall not be unreasonably withheld or delayed.
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<PAGE>
10.7. CERTAIN ADJUSTMENTS. Any payment required to be made by an
-------------------
Indemnitor pursuant to Section 10.2 or 10.3 or the last sentence of Section 10.4
shall be deemed to be, and shall be treated by the parties for all purposes as,
an adjustment to the Purchase Price.
10.8. EXCLUSIVE REMEDY. Except as provided in Section 7.22 or for
----------------
the availability of injunctive relief, if the Closing occurs, this Article X
shall be the exclusive remedy for breach or failure of any party referred to in
Sections 10.2 or 10.3, and no party shall make any claim hereunder other than
pursuant to the terms of this Article X.
ARTICLE XI
TERMINATION
-----------
11.1. TERMINATION. This Agreement may be terminated at any time
-----------
prior to the Closing Date only: (a) by the mutual consent of Buyer, Seller, TFC
and General Partner; (b) by either Buyer, if any of its conditions to Closing
contained in Article VIII, or by Seller, if any of its conditions to Closing
contained in Article IX, respectively, have not been fulfilled or waived on or
before April 30, 1992 (the "Termination Date"), which Termination Date may be
extended (i) until June 30, 1992 by Buyer, on the one hand, or Seller on the
other hand, if such party shall give the other notice that such party is taking
action in good faith to cause fulfillment of the conditions to Closing,
provided, that, (x) if neither party shall give the other such a notice on or
- -------- ----
prior to April 30, 1992, this Agreement shall terminate as of April 30, 1992 and
(y) if either Buyer or Seller shall give the other notice subsequent to such
notice extending the Termination Date that such party has abandoned its good
faith efforts to cause fulfillment of the conditions to Closing (which notice
either such party shall give if it has so abandoned), the recipient of such
subsequent notice shall then have the right to terminate this Agreement or (ii)
pursuant to Section 6.8, but, in any case, the Termination Date shall be no
later than June 30, 1992, unless otherwise agreed to by the parties; (c) by
Buyer, if there has been a material misrepresentation or breach of warranty in
the representations and warranties of Seller, TFC or General Partner or a
material breach by Seller of any of its covenants or agreements contained herein
which shall not have been remedied or cured prior to the Closing Date; or (d) by
Seller, if there has been a material misrepresentation or breach of warranty in
the representations and warranties of Buyer or a material breach by Buyer of any
of its covenants or agreements contained herein which shall not have been
remedied or cured prior to the Closing Date.
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11.2. EFFECT OF TERMINATION. (a) If this Agreement shall be
---------------------
terminated pursuant to Section 11.1 or otherwise pursuant to law, then in
addition to the rights under Section 12.8, the parties shall have all rights
which they may have under law or in equity.
(b) Notwithstanding the provisions of paragraph (a) above, in the
event that Buyer terminates this Agreement as a result of a Disclosure relating
to a matter that occurred or existed on or prior to the date of this Agreement
(as provided in Section 6.8), the sole right of Buyer shall be to pursue its
remedies at law against Seller, General Partner and TFC for breach of the
representations and warranties to which Disclosure relates, provided, that, the
-------- ----
aggregate damages recoverable from all of Seller, General Partner and TFC
pursuant to this Section 11.2(b) shall not exceed $1,250,000, except that Buyer
------
shall in any event retain all of its rights pursuant to Section 12.8.
ARTICLE XII
GENERAL PROVISIONS
------------------
12.1. SUCCESSORS AND ASSIGNS, PARTIES, ETC. (a) Subject to Section
-------------------------------------
12.1(c), no assignment of this Agreement or of any rights or obligations
hereunder may be made by any party (by operation of law or otherwise) without
the prior written consent of the others and any attempted assignment without the
required consent shall be void; provided, however, that Buyer may assign its
-------- -------
rights under this Agreement to any of its lenders, it being agreed and
acknowledged by the parties that no such assignment shall have the effect of
increasing the obligations of Seller, TFC or General Partner pursuant to this
Agreement or giving any assignee any rights or claims against Seller, TFC or
General Partner which would be more favorable than any Buyer Group Member would
have had against Seller, TFC or General Partner had the corresponding assignment
not taken place.
(b) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their successors and permitted assigns. Nothing
herein, expressed or implied, is intended or shall be construed to confer upon
any Person, including any employee or dependent thereof, other than the parties
and successors and assigns permitted by this Section 12.1 and the other Buyer
Group Members and Seller Group Members as stated herein, any right, remedy or
claim under or by reason hereof.
(c) Nothing contained herein or in any Seller Ancillary Agreement
shall be construed to prohibit, restrict or impair the assignment (by way of
transfer or participation), in whole or in part, of Seller's interest in the
Earn-Out Payment or the Earn-Out Notes; provided, that, there shall always be,
-------- ----
to the extent permitted by law, one Person (the "Designee") (which
81
<PAGE>
Person shall initially be Seller, and Seller shall use good faith efforts to
designate a substitute Designee prior to Closing) from time to time designated
by, or pursuant to procedures approved by, the holders (the "Holders") of all
interests in the Earn-Out Payment and the Earn-Out Note (the "Interests") (i) to
make all decisions, (ii) to receive and distribute all notices and other
communications, (iii) to receive and distribute all payments and (iv) otherwise
generally to act for and on behalf of the Holders in respect of the Interests
(including the resolution of all disputes with respect to the Earn-Out Payment,
the Earn-Out Notes and the Interests). Each Holder shall, by holding an
Interest, automatically have consented to the appointment of the Designee and
the Designee's authority as described above, including without limitation
Buyer's right to treat the Designee as the payee of the Earn-Out Payment and the
Earn-Out Notes for all purposes as contemplated by this Section 12.1(c). Such
authority shall be exercised so that (i) such decisions shall be made within the
period required by the relevant documents governing the Earn-Out Payment, the
Earn-Out Notes and the Interests (and in that connection the Designee may act
upon the instructions of the Holders, in such numbers as they may agree,
provided that the Designee shall have full authority to act in the absence of
receipt of timely instructions), (ii) such notices and other communications need
not be sent to the Holders (and such notices and other communications shall not
be forwarded by the Designee to the Holders unless the Holders have executed
reasonable confidentiality agreements in a form to be agreed upon by the parties
hereto on or before the Closing Date), (iii) such payments shall be made
directly to the Designee (and in that connection, Buyer shall have no duty to
see that such payments are delivered to and/or properly applied as among the
Holders, and any such payment properly made to the Designee shall release and
discharge Buyer of its obligation otherwise to make such payment and/or
application to the Holders) and (iv) such Holders shall not otherwise attempt to
exercise authority in lieu of the Designee. Any certificates evidencing
Interests shall, if desired by Buyer, be appropriately legended to reflect the
foregoing provisions relating to the Designee. The Designee shall provide Buyer
with evidence of its authority to exercise such authority.
(d) Notwithstanding the foregoing, no such assignment shall be made
that (i) would violate the then applicable Federal and state securities laws or
rules and regulations of the Securities and Exchange Commission, any state
securities commission or any other governmental authority with jurisdiction over
such transfer, (ii) would affect Buyer's existence or qualification as a limited
partnership under Delaware law, (iii) would cause Buyer to be treated as an
association taxable as a corporation for U.S. Federal income tax purposes, (iv)
would be to a Person that is not a "United States Person" (as defined in Section
7701(a)(30) of the Code) or that
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is subject to U.S. backup withholding under Section 3406 of the Code, or (v)
would result in Buyer having to issue Tax Returns to more than three (3) such
Holders.
12.2. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits
----------------------------
and Schedules referred to herein and the documents delivered pursuant hereto
contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior agreements,
understandings or letters of intent between or among any of the parties
hereto, including the letter of intent (the "Letter of Intent") dated December
20, 1991 among Seller, TFC and CCI, as amended, the Confidentiality Agreement
(which shall survive any termination of this Agreement) and any disclosure made
or omitted pursuant to the Private and Confidential Muzak Limited Partnership
Review Document dated July 1991 delivered to Buyer with respect to the Business,
as to which no representation or warranty is made. This Agreement shall not be
amended, modified or supplemented except by a written instrument signed by an
authorized representative of each of the parties hereto.
12.3. WAIVERS. Any term or provision hereof may be waived, or the
-------
time for its performance may be extended, by the party or parties entitled to
the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes hereof if, as to any party, it is authorized in
writing by an authorized representative of such party. The failure of any party
hereto to enforce at any time any provision hereof shall not be construed to be
a waiver of such provision, nor in any way to affect the validity hereof or any
part hereof or the right of any party thereafter to enforce each and every such
provision. No waiver of any breach hereof shall be held to constitute a waiver
of any other or subsequent breach.
12.4. NOTICES. All notices or other communications required or
-------
permitted hereunder shall be in writing and shall be deemed given or delivered
(i) when delivered personally or by private courier, (ii) when actually
delivered by registered or certified United States mail or (iii) when sent by
telecopy (provided, that, it is confirmed by a means specified in clause (i) or
(ii), addressed as follows:
If to Buyer, to:
MLP Operating, L.P.
c/o Centre Partners, L.P.
One Rockefeller Plaza
New York, New York 10020
Attention: Lester Pollack
Telecopier: (212) 632-4846
Telephone Confirmation: (212) 632-4829
83
<PAGE>
With a copy after the Closing to:
Muzak Limited Partnership
400 North 34th Street
Suite 200
Seattle, Washington
Attention: John R. Jester
Telecopier: (206) 633-6210
Telephone Confirmation: (206) 633-3000
With a copy to:
Rosenman & Colin
575 Madison Avenue
New York, New York 10022
Attention: Michael Roth, Esq.
Telecopier: (212) 940-8776
Telephone Confirmation (212) 940-8800
If to Seller, to:
c/o The Field Corporation
333 West Wacker Drive
Chicago, Illinois 60606
Attention: President
Telecopier: (312) 917-1822
Telephone Confirmation: (312) 917-1860
With a copy to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attention: Myles C. Pollin, Esq.
Telecopier: (212) 906-2021
Telephone Confirmation: (212) 906-2000
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
12.5. PARTIAL INVALIDITY. Wherever possible, each provision hereof
------------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
84
<PAGE>
12.6. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
-------------------------
one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties hereto and delivered to each of Seller and Buyer.
12.7. GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of New York.
12.8. EXCLUSIVITY. Prior to the Termination Date, Seller, General
-----------
Partner and TFC shall not, and shall not permit any of their respective
directors, officers, employees, representatives, agents or Affiliates to (x)
initiate contact with, solicit or actively encourage any inquiries, proposals or
offers by, or (y) participate actively in any discussions or negotiations with,
or disclose any information concerning Seller to, any Person other than Buyer in
connection with any possible proposal regarding the sale of the Purchased Assets
or the Business. In the event that Seller or TFC breaches any of its obligations
pursuant to this Section 12.8, Seller and TFC, jointly and severally, agree, in
addition to any other remedies that Buyer and CCI may have in law or equity, to
promptly upon such breach reimburse Buyer and CCI for all of their respective
reasonable out-of-pocket expenses and fees actually and reasonably incurred in
connection with the transactions contemplated by this Agreement, including but
not limited to fees paid or owed to potential financing sources or other third
parties (other than fees paid to Affiliates of Buyer), and attorneys' fees, up
to a maximum of $3,400,000; provided, that Buyer and CCI shall not in any event
-------- ----
be entitled to any such reimbursement if the Closing occurs.
ARTICLE XIII
DEFINITIONS AND INTERPRETATION
------------------------------
13.1. DEFINITIONS. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 13.1 and shall be equally
applicable to both the singular and plural forms.
"ACCOUNTANTS" means Arthur Andersen & Co., independent public
-----------
accountants with respect to Seller.
"ADJUSTMENT" has the meaning specified in Section 2.3(e).
----------
85
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
"ADMINISTRATIVE GENERAL PARTNER" has the meaning specified in Section
------------------------------
2.5(d)(ii).
"AFFILIATE" means, with respect to any Person, any other Person which
---------
directly or indirectly controls, is controlled by or is under common control
with such Person. A Licensee shall not be deemed an Affiliate solely by virtue
of the licensing arrangements between it and Seller, and neither the German
Licensee nor any of the Trusts shall be deemed to be an Affiliate of Seller.
"ALTERNATIVE" has the meaning specified in Section 6.6(b).
-----------
"AMENDED PARTNERSHIP AGREEMENT" has the meaning specified in Section
-----------------------------
7.21.
"APPRAISAL" has the meaning specified in Section 2.2(a).
---------
"ARBITRATOR" has the meaning specified in Section 2.3(g).
----------
"ASSUMED LIABILITIES" has the meaning specified in Section 1.3.
-------------------
"ASSUMPTION AGREEMENT" means the Undertaking and Assumption in the
--------------------
form of Exhibit H.
"BACKGROUND MUSIC SERVICES" means providing subscribers or other
-------------------------
licensees with music embodied in sound recordings created especially for the
Business.
"BASE PERIOD" has the meaning specified in Section 2.5(a).
-----------
"BILL OF SALE" means the bill of sale to be executed by Seller at
------------
Closing in form and substance reasonably satisfactory to Buyer and Seller.
"BUSINESS" has the meaning specified in the first recital hereof.
--------
"BUYER" has the meaning specified in the first paragraph hereof.
-----
"BUYER ANCILLARY AGREEMENTS" means all agreements, instruments and
--------------------------
documents being or to be executed and delivered by Buyer hereunder or pursuant
hereto. Without limiting the generality of the foregoing, each of the Earn-Out
Note and the [**] will, if issued, be a Buyer Ancillary Agreement.
86
<PAGE>
"BUYER GROUP MEMBER" means Buyer, its partners, its partners' partners
------------------
and their Affiliates and their directors, officers, employees agents, attorneys
and consultants and their respective successors and assigns; provided, that,
-------- ----
only one claim for indemnification pursuant to Article X may be made by all the
Buyer Group Members for each related claim for such indemnification except to
the extent that there is a conflict of interest among the Buyer Group Members
with respect to such claim.
"BUYER'S ACCOUNTANT" has the meaning specified in Section 2.3(g).
------------------
"CASH EQUIVALENT" means a cash equivalent or any security for which a
---------------
current fair value can be readily determined by reference to current quotations
on an established trading market, as determined reasonably and in good faith by
Buyer.
"CCI" means Centre Capital Investors L.P., a Delaware limited
---
partnership.
"CENTRE PARTNERS" means Centre Partners L.P., a Delaware limited
---------------
partnership.
"CERCLA" has the meaning specified in the definition of "Hazardous
------
Substances".
"CLAIM" has the meaning specified in Section 10.6.
-----
"CLAIM ACKNOWLEDGEMENT PROCEDURE" has the meaning specified in Section
-------------------------------
10.6.
"CLAIM NOTICE" has the meaning specified in Section 10.5.
------------
"CLOSING" means the closing of the Transfer of the Purchased Assets
-------
from Seller to Buyer and the payment of the Purchase Price from Buyer to Seller,
and "CLOSE" has a comparable meaning.
-----
"CLOSING DATE" has the meaning specified in Section 3.1.
------------
"CLOSING DATE BALANCE SHEET" has the meaning specified in Section
--------------------------
2.3(b).
"CLOSING PAYMENT" has the meaning specified in Section 2.4(b).
---------------
"CODE" means the Internal Revenue Code of 1986, as amended.
----
87
<PAGE>
"COMMUNICATIONS ACT" has the meaning specified in Section 4.30.
------------------
"CONFIDENTIALITY AGREEMENT" means the Confidentiality
-------------------------
Agreement dated July 24, 1991, between Centre Partners and Veronis, Suhler &
Associates Inc., as amended by the Letter of Intent.
"CONTEST NOTICE" has the meaning specified in Section 2.3(f).
--------------
"CONTRACTS" has the meaning specified in Section 1.1(x).
---------
"COPYRIGHT ACT" means Title 17 of the United States Code Annotated,
-------------
Sections 101 et seq., currently in effect.
"DAMAGES" has the meaning specified in Section 10.2.
-------
"DESIGNEE" has the meaning specified in Section 12.1(c).
--------
"DETERMINATION DATE" has the meaning specified in Section 2.5(a).
------------------
"DISCLOSURE" has the meaning specified in Section 6.8.
----------
"DISPUTED MATTERS" has the meaning specified in Section 2.3(g).
----------------
"EARN-OUT ARBITRATOR" has the meaning specified in Section 2.5(f).
-------------------
"EARN-OUT CERTIFICATE" has the meaning specified in Section 2.5(f).
--------------------
"EARN-OUT CONTEST NOTICE" has the meaning specified in Section 2.5(f).
-----------------------
"EARN-OUT DISPUTED MATTERS" has the meaning specified in Section
-------------------------
2.5(f).
"EARN-OUT NOTES" has the meaning specified in Section 2.5(b).
--------------
"EARN-OUT PAYMENT" has the meaning specified in Section 2.5(a).
----------------
"EBITDA" has the meaning specified in Section 2.5(c).
------
"EBITDA CONTRIBUTOR" means a Subsidiary or any other Person in which
------------------
Buyer has any direct or indirect equity interest other than Cash Equivalents.
88
<PAGE>
"ENCUMBRANCE" means any mortgage, pledge, security interest, lien,
-----------
restriction on use or transfer, voting agreement, adverse claim or encumbrance
or charge of any kind (including any agreement to give any of the foregoing),
any conditional sale or other title retention agreement, and the filing of, or
any agreement to give, any financing statement under the Uniform Commercial
Code or similar law of any jurisdiction.
"ENVIRONMENT" shall mean soil, surface waters, ground waters, land,
-----------
stream, sediments, surface or subsurface strata and ambient air.
"ENVIRONMENTAL APPROVALS" has the meaning specified in Section
-----------------------
4.17(a).
"ENVIRONMENTAL CONDITION" shall mean any condition with respect to the
-----------------------
Environment on any facility which is now or has heretofore been owned or used in
connection with the Business ("Facility"), whether or not yet discovered, which
could nor does result in any Damages, including any condition resulting from the
operation of the Business or the operation of the Business of any subtenant or
occupant of any Facility.
"ENVIRONMENTAL CONSULTANT" has the meaning specified in Section
------------------------
6.1(b).
"ENVIRONMENTAL LAWS" shall mean all Governmental Rules relating to
------------------
injury to, or the protection of, real or personal property or human health or
the Environment as in effect prior to the Closing Date, including, without
limitation, all valid and lawful requirements of courts and other Governmental
Bodies pertaining to reporting, licensing, permitting, investigation,
remediation and removal of, emissions, discharges, releases or threatened
releases of Hazardous Substances (as defined herein), chemical substances,
pesticides, petroleum or petroleum products, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the Environment, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances, pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature.
"ERISA" has the meaning specified in Section 4.18(a)(i).
-----
"ERISA AFFILIATE" has the meaning specified in Section 4.18(a)(ii).
---------------
"ESTIMATED BALANCE SHEET" has the meaning specified in Section 2.4(a).
-----------------------
89
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
"EVENT" has the meaning specified in Section 2.5(d).
-----
"[**]" has the meaning specified in Section 2.1.
--------------
"EXCLUDED CONTRACT" means any contract or other agreement not
-----------------
Transferred to the Buyer pursuant hereto by reason of a consent, approval or
modification of a third party required to Transfer any such contract or
agreement not being obtained.
"EXCLUDED LIABILITIES" has the meaning specified in Section 1.4.
--------------------
"FACILITY" has the meaning specified in the definition of
--------
"Environmental Condition".
"FCC" means the Federal Communications Commission.
---
"FCC APPLICATIONS" has the meaning specified in Section 6.6(d).
----------------
"FCC CONSENTS" has the meaning specified in Section 6.6(d).
------------
"FCC RULES" means Title 47 of the Code of Federal Regulations.
---------
"FIELD PERSON" means Marshall Field V or any of his Affiliates.
------------
"FOREGROUND MUSIC SERVICES" means providing subscribers or other
-------------------------
licensees with music embodied in sound recordings previously issued to the
public on phonorecords in connection with the Business.
"GAAP" means United States generally accepted accounting principles.
----
"GENERAL PARTNER" has the meaning specified in the first paragraph
---------------
hereof.
"GERMAN LICENSEE" has the meaning specified in the second recital
---------------
hereof.
"GERMAN LICENSEE SHARES" has the meaning specified in the second
----------------------
recital hereof.
"GOVERNMENTAL BODY" means any Federal, state, local or foreign
-----------------
governmental authority or regulatory body, any subdivision, agency, commission
or authority thereof (including, without limitation, environmental protection,
planning and
90
<PAGE>
zoning), or any quasi-governmental or private body exercising any regulatory
authority thereunder and any Person directly or indirectly owned by and subject
to the control of any of the foregoing, or any court, arbitrator or other
judicial or quasi-judicial tribunal.
"GOVERNMENTAL PERMITS" has the meaning specified in Section 4.9.
--------------------
"GOVERNMENTAL RULE" means any statute, law, treaty, rule, code,
-----------------
ordinance, regulation, permit, certificate or order of any Governmental Body or
any judgment, decree, injunction, writ, order or like action of any Governmental
Body.
"HAZARDOUS SUBSTANCES" shall mean any substance:
--------------------
(a) the presence of which requires notification, investigation, or
remediation under any Environmental Law as in effect prior to the Closing Date;
or
(b) which prior to the Closing Date is or becomes defined as a
"hazardous waste", "hazardous material" or "hazardous substance" or "pollutant"
or "contaminant" under any present or future Environmental Law or amendments
thereto including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et seq.), the
-- ---
Resource Conservation and Recovery Act ("RCRA") (42 U.S.C. Section 6901 et
--
seq.), the Clean Air Act, 42 U.S.C. (S)7401 et seq. and any Environmental Law
- --- -- ---
applicable to any jurisdiction in which or from which Seller conducts or has
conducted the Business; or
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any Governmental Body under Environmental Laws prior to the Closing
Date; or
(d) without limitation, which contains gasoline, diesel fuel or other
petroleum hydrocarbons or volatile organic compounds; or
(e) without limitation, which contains polychlorinated byphenyls
(PCBs) or asbestos or urea formaldehyde foam insulation; or
(f) without limitation, which contains or emits radioactive
particles, waves or materials, including radon gas.
"HEALTH AND WELFARE BENEFIT PROGRAM" has the meaning specified in
----------------------------------
Section 7.4.
91
<PAGE>
"HMC" means Heritage Media Corporation, an Iowa corporation.
---
"HOLDER" has the meaning specified in Section 12.1(c).
------
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976
---
and regulations thereunder.
"INDEMNITEE" has the meaning specified in Section 10.5(a).
----------
"INDEMNITOR" has the meaning specified in Section 10.5(a).
----------
"INSTRUMENTS OF ASSIGNMENT" means the Bill of Sale, intellectual
-------------------------
property assignments and other appropriate instruments to effect the Transfer of
the Purchased Assets.
"INSTRUMENTS OF ASSUMPTION" means the Assumption Agreement and such
-------------------------
other appropriate instruments to effect Buyer's assumption of the Assumed
Liabilities, including an instrument relating to the Torrance Note.
"INTELLECTUAL PROPERTY ASSIGNMENT" has the meaning specified in
--------------------------------
Section 7.12.
"INTERESTS" has the meaning specified in Section 12.1(c).
---------
"INVENTIONS" has the meaning specified in Section 1.1(vi).
----------
"IRS" means the Internal Revenue Service.
---
"LETTER OF INTENT" has the meaning specified in Section 12.2.
----------------
"LICENSEE" has the meaning specified in the second recital hereof.
--------
"LIMITED PARTNER" means Muzak Investment Partners, L.P., a Delaware
---------------
limited partnership.
"MANAGEMENT INVESTMENT PLAN" means the management investment plan of
--------------------------
Seller dated January 1, 1988.
"MANAGEMENT OPTION PLAN" has the meaning specified in Section
----------------------
2.5(d)(ii).
"MARKETABLE SECURITIES" means all marketable and similar securities
---------------------
owned, beneficially or of record, by Seller, including all money market funds,
stocks, bonds, commercial
92
<PAGE>
paper, certificates of deposit or other time deposits of Seller, excluding the
Quota.
"MAS" has the meaning specified in Section 4.30.
---
"MICROSPACE" means MicroSpace Communications Corporation, a North
----------
Carolina corporation.
"MLP ACQUISITION" has the meaning specified in Section 5.1(b).
---------------
"MULTIEMPLOYER PLAN" has the meaning specified in Section
------------------
4.18(a)(iii).
"MUSIC SERVICES" means, collectively, Background Music Services and
--------------
Foreground Music Services.
"MUSIC SERVICES CONTRACTS" means contracts to arrange, produce,
------------------------
record, copy and disseminate the Music Services, excluding contracts relating to
subscriptions with Licensees.
"NET ASSETS" has the meaning specified in Section 2.3(c).
----------
"NET CAPITAL EXPENDITURES" has the meaning specified in Section
------------------------
2.3(d).
"NON-COMPETITION AGREEMENT" means the Non-Competition Agreement dated
-------------------------
the Closing Date among Seller, General Partner, TFC, Marshall Field V, the
Trusts and Buyer in the form attached as Exhibit B.
"NOTICE PARTY" has the meaning specified in Section 1.7.
------------
"OCTOBER STATEMENT" means the statement of assets and liabilities of
-----------------
Seller attached as Schedule 13.1.
"OCTOBER BALANCE SHEET" means the balance sheet of Seller as of
---------------------
October 31, 1991 contained in Schedule 4.4.
"OCTOBER BALANCE SHEET DATE" means October 31, 1991.
--------------------------
"ON PLAN" has the meaning specified in Section 2.5(c).
-------
"OPERATING LEASE ADJUSTMENT" has the meaning specified in Section
--------------------------
2.5(c).
"PATENT, TRADEMARK AND INTELLECTUAL PROPERTY RIGHTS" has the meaning
--------------------------------------------------
specified in Section 1.1(vi).
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<PAGE>
"PARTICIPATIONS" means royalties or other contingent payments payable
--------------
pursuant to written contractual provisions to third parties by Seller in
connection with Music Services Contracts.
"PAYEE" has the meaning specified in the definition of Setoff
-----
Procedure.
"PAYEE PAYMENT" has the meaning specified in the definition of Setoff
-------------
Procedure.
"PAYOR" has the meaning specified in the definition of Setoff
-----
Procedure.
"PAYOR PAYMENT" has the meaning specified in the definition of Setoff
-------------
Procedure.
"PBGC" has the meaning specified in Section 4.18(a)(iv).
----
"PERMITTED ENCUMBRANCES" means liens for taxes and other governmental
----------------------
charges and assessments which are not yet due and payable and immaterial
mechanics', materialmen's and similar liens.
"PERMITTED SECURITIES" has the meaning specified in Section 2.5(d)(v).
--------------------
"PERSON" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
Governmental Body.
"PHASE I AUDIT" has the meaning specified in Section 6.1(b).
-------------
"PHASE II AUDIT" has the meaning specified in Section 6.1(b).
--------------
"PLAN" has the meaning specified in Section 4.18(a)(v).
----
"POP" means POP Radio Corporation, a New York corporation.
---
"POP AGREEMENT" means the joint operating agreement, dated as of
-------------
September 30, 1987, between Seller and POP, as amended from time to time.
"POP ASSETS" means the "Purchased Assets" referred to in the POP
----------
Agreement.
"POP GUARANTY" means the "Guaranty Agreement" referred to in Section
------------
3.01 of the POP Agreement.
94
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
"POP NOTE" means the "Note" referred to in the POP Agreement.
--------
"POP SALE DOCUMENTS" means (a) (i) the note of HMC delivered as part
------------------
of the consideration for the sale of the POP Assets and (ii) the security
agreement of HMC securing such note and the note referred to in clause (b)(ii)
below and (b) (i) the securities purchase agreement between HMC and Field
Investments Partnership providing for the sale to HMC of certain settlement
rights relating to the value of the stock of Actmedia, Inc. to HMC and (ii) the
note of HMC delivered as consideration therefor.
"PREDECESSOR LICENSING AGREEMENTS" has the meaning specified in
--------------------------------
Section 4.21.
"[**]" has the meaning specified in Section 2.1.
----
"PROJECTED CAPITAL EXPENDITURES" has the meaning specified in Section
------------------------------
2.3(d).
"PROPRIETARY RIGHTS" has the meaning specified in Section 1.1(vi).
------------------
"PROPRIETARY RIGHTS LICENSES" has the meaning specified in Section
---------------------------
1.1(vi).
"PROTECTED INFORMATION" has the meaning specified in Section 7.13.
---------------------
"PURCHASE PRICE" has the meaning specified in Section 2.1.
--------------
"PURCHASED ASSETS" has the meaning specified in Section 1.1.
----------------
"RCRA" has the meaning specified in the definition of "Hazardous
----
Substances".
"ROFR CONSIDERATION" has the meaning specified in Section 7.30.
------------------
"ROFR TRANSFER" has the meaning specified in Section 7.30.
-------------
"RESPONSIBLE PARTY" has the meaning specified in Section 1.7.
-----------------
"SAVINGS PLAN" has the meaning specified in Section 7.4.
------------
95
<PAGE>
"SCA LESSORS" means those FM broadcast stations from which Seller
-----------
leases a sub-carrier channel.
"SELLER" has the meaning specified in the first paragraph hereof.
------
"SELLER AGREEMENTS" has the meaning specified in Section 4.21.
-----------------
"SELLER ANCILLARY AGREEMENTS" means all agreements, instruments and
---------------------------
documents being or to be executed and delivered by Seller hereunder or pursuant
hereto.
"SELLER DEBT" means the Credit Agreement among Seller, the financial
-----------
institutions named therein and the First National Bank of Chicago, as agent for
such financial institutions, dated as of March 9, 1989.
"SELLER GROUP MEMBER" means Seller, TFC, General Partner, their
-------------------
partners, their partners' partners, the Trusts and their Affiliates, trustees,
beneficiaries and their directors, officers, employees, agents, attorneys and
consultants and their respective successors and assigns.
"SELLER'S ACCOUNTANT" has the meaning specified in Section 2.3(g).
-------------------
"SETOFF PROCEDURE" means the following procedure to be followed with
----------------
respect to the right of a payor ("Payor") to setoff, against the amount of a
payment ("Payor Payment") otherwise to be made by the Payor to a payee entitled
thereto ("Payee"), an amount of a payment otherwise to be made by a Payee to the
Payor ("Payee Payment"): (i) the amount and time of the Payee Payment shall have
been fixed by agreement between the Payor and the Payee or its representative or
by a final non-appealable order of a court of competent jurisdiction, (ii) the
amount of the setoff shall be limited to the extent of any actual shortfall in
the Payee Payment plus interest on such amount (at the rate of interest or other
----
rate of return set forth in the instrument creating the Payor Payment against
which the setoff is being made) from the date of the determination of the amount
of the setoff until the date that the Payor Payment would otherwise be made by
Payor, (iii) notice must be given to the Payee, which shall be made on the date
on which the Payor Payment was required to be made and which shall be reasonable
under the circumstances and (iv) the amount of the setoff shall be pro rata (to
the extent practicable) to the Payees entitled to share a Payor Payment.
"SIGNIFICANT ASSETS" has the meaning specified in Section 2.5(e)(i).
------------------
96
<PAGE>
"SIGNIFICANT ASSET PURCHASE" has the meaning specified in Section
--------------------------
2.5(e)(i).
"SIGNIFICANT ASSET SALE" has the meaning specified in Section
----------------------
2.5(e)(i).
"SINGLE EMPLOYER DEFINED BENEFIT PLAN" has the meaning specified in
------------------------------------
Section 4.18(a)(vi).
"SOFTWARE" has the meaning specified in Section 1.1(a)(vi).
--------
"SUBSIDIARY" means a Person in which Buyer has a direct or indirect
----------
ownership interest that either (i) entitles Buyer directly or indirectly to cast
a majority of the votes, consents or other approvals cast by holders of
ownership interests in such Person generally or (ii) entitles Buyer directly or
indirectly to exercise control over the management or policies of such Person.
"SUM" has the meaning specified in Section 2.5(a).
---
"TAX" means all foreign, and all U.S. Federal, state, and local,
---
income, gross receipts, import, ad valorem, VAT, license, stamp, documentary,
estimated or interim, employment, payroll, withholding, minimum, franchise,
profits, sales, transfer, use, gains, recordation, property, occupancy, excise
or other taxes, together with all assessments, interest, penalties,
deficiencies, fees, additions to tax and other governmental charges or
impositions relating thereto, imposed by any Governmental Body.
"TAX RETURN" means any return, report, document, statement or form
----------
required to be filed (whether on a consolidated, combined, separate or unitary
basis) with respect to any Taxes (including any schedules required to be
attached thereto), including, without limitation, information returns, claims
for refund, amended returns, and declarations of estimated Tax.
"TECHNICAL INFORMATION" has the meaning specified in Section
---------------------
1.1(a)(vi).
"TERMINATION DATE" has the meaning specified in Section 11.1.
----------------
"TFC" has the meaning specified in the first paragraph hereof.
---
"TORRANCE NOTE" means the Subordinated Note of Seller payable to Mark
-------------
Torrance made on December 31, 1986, as modified by the Note Modification
Agreements dated as of January 21, 1987 and July 10, 1989.
97
<PAGE>
"TOWER SITE LEASE" has the meaning specified in Section 4.30(g).
----------------
"TRANSFER" means sell, transfer, assign, convey, lease and/or deliver
--------
(other tenses of the term have similar meaning) or sale, transfer, assignment,
conveyance, lease and/or delivery, as indicated by the context.
"TRANSFER EVENT" means (i) a Transfer of substantially all of the
--------------
assets of Buyer, (ii) a change in control of the board of directors of the
general partner of MLP Acquisition (or if Buyer is a corporation, of the Board
of Directors of Buyer) pursuant to which any single Person other than an
Affiliate of Buyer on the date hereof acquires control of such board of
directors or (iii) the Transfer of at least 51% or more of the voting equity
interests in Buyer (or any parent of Buyer), whether by sale, merger or
consolidation, to any single Person or two or more Affiliated Persons (provided
that such two or more Affiliated Persons would be considered to be acting in
concert as a "group" for purposes of Section 13(d) of the Securities Exchange
Act of 1934, for purposes hereof treating such voting equity interests as if
such voting equity interests were equity securities in respect of which a
Schedule 13D would be required to be filed with the Securities and Exchange
Commission as if the requisite percentage and other threshold conditions to such
filing were satisfied) (other than a pledge of the voting equity interests in
Buyer to the holders of the debt financing referred to in Section 5.5 or any
refinancing thereof); provided, however, that a "Transfer Event" shall not
-------- -------
include (i) a change of control of CCI or Centre Partners or their successors
(unless at the time of such change of control, substantially all the operating
assets of CCI or Centre Partners directly or indirectly, are assets of Buyer),
(ii) any Transfer of the voting equity interests in Buyer of CCI or MLP
Acquisition to each other and/or to an affiliate or one or more partners of CCI,
MLP Acquisition or Centre Partners, or (iii) a Transfer of substantially all of
the assets of Buyer in connection with an incorporation of Buyer and its
business and assets in accordance with the provisions of the Amended Partnership
Agreement.
"TRUSTEE" has the meaning specified in Section 7.4.
-------
"TRUST AGREEMENT" has the meaning specified in Section 7.4.
---------------
"TRUST FUND" has the meaning specified in Section 7.4.
----------
"TRUSTS" means the trusts that are limited partners of the Limited
------
Partner.
"UNION" means each collective bargaining unit or union with which
-----
Seller has a collective bargaining or similar agree-
98
<PAGE>
ment.
"UNION AGREEMENT" means each collective bargaining or similar
---------------
agreement between Seller and a Union.
"WARN ACT" means the Worker Adjustment and Retraining Notification
--------
Act.
"WEIGHTED AVERAGE ANNUAL LEASE RATE" has the meaning specified in
----------------------------------
Section 2.5(c).
13.2. INTERPRETATION. As used herein, (a) "include", "includes" and
--------------
"including" are deemed to be followed by "without limitation" whether or not
they are in fact followed by such word or words of like import, (b) references
to any agreement or other document or Governmental Rule are to it as amended and
supplemented from time to time (and, in the case of a Governmental Rule, to any
successor provision in the absence of an explicit contrary specification set
forth in this Agreement), (c) references to "Article", "Section" or another
subdivision or to an attachment, "Exhibit" or "Schedule" are to an article,
section or subdivision hereof or an attachment, "Exhibit" or "Schedule" hereto,
and (d) "hereof ", "herein", "hereunder" and comparable terms refer to the
entirety hereof and not to any particular article, section or other subdivision
hereof or attachment hereto. Article titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation hereof. The Schedules and Exhibits
referred to herein shall be construed with and as an integral part hereof to the
same extent as if they were set forth verbatim herein. The specification of any
dollar amount in the representations or warranties contained herein or the
inclusion of any specific item in any Schedules hereto is not intended to imply
that such amounts, or higher or lower amounts, or the items so included or other
items, are or are not material, and neither party shall use the fact of the
setting of such amounts or the inclusion of any such item in any
99
<PAGE>
dispute or controversy between the parties as to whether any obligation, item or
matter not described herein or included in a Schedule is or is not material for
purposes hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
MLP OPERATING, L.P.
By: MLP ACQUISITION, L.P.
Managing General Partner
By: MUSIC HOLDINGS CORP.
General Partner
By: [SIGNATURE ILLEGIBLE]
--------------------------------
Title: Vice President
MUZAK LIMITED PARTNERSHIP
By: FIELD/MUZAK, INC.
General Partner
By: [SIGNATURE ILLEGIBLE]
--------------------------------
Title: Vice President
FIELD/MUZAK, INC.
By: [SIGNATURE ILLEGIBLE]
--------------------------------
Title: Vice President
THE FIELD CORPORATION
By: [SIGNATURE ILLEGIBLE]
--------------------------------
Title: Vice President
<PAGE>
MUZAK LIMITED PARTNERSHIP
April 22, 1992
MLP Operating, L.P.
c/o Centre Partners, L.P.
One Rockefeller Plaza
New York, New York 10020
Attention: Messrs. Lester Pollack
Mark Jennings
Dear Sirs:
Pursuant to Section 6.8 of the Asset Purchase Agreement ("Agreement"),
dated as of March 11, 1991, between Muzak Limited Partnership ("Seller"), The
Field Corporation and Field/Muzak, Inc. and MLP Operating, L.P., Seller hereby
makes the following Disclosures:
(A) Schedule 4.6 is amended by inserting, after the text in entry
number 2, the following:
"3. Reference is hereby made to the disclosure made in Schedule
4.7, and such disclosure is incorporated herein.
4. Reference is hereby made to the disclosure made in Schedule
4.22(b), paragraph 12, and such disclosure is incorporated herein."
(B) Schedule 4.7 is amended by deleting the phrase "[Intentionally
Left Blank]" and inserting, in lieu thereof, the following:
"Seller's excise tax returns for the years 1987 to September 1991
filed with Washington are currently under examination by that State's
Department of Revenue. Based upon preliminary conversations with
representatives of the Department, the State might assert that
Seller's tax base should be increased significantly, which would
increase its tax liability. Seller does not know whether the State
will assert that an increase is due or, if so, what the potential
amount of such an increase would be, Discussions with the State
Department of Revenue are ongoing. Seller believes that it has several
avenues, for pursuing a remedy should the State's determination be
unfavorable."
<PAGE>
(C) Schedule 4.19(b) is amended by inserting on page three thereof,
in the far right column horizontally across from the words "Texas Wired Music,
Inc.", the following:
"01-01-87 10% discount on royalty
fees for music services
for on-premise accounts for San
Antonio, Austin and Corpus
Christi
04 08 92 letter confirming
discount not applicable to
El Paso"
(D) Schedule 4.22 is amended by inserting under the heading "4.22
----
(b)", after the text in entry number 10 thereof, the following:
- ---
"11. In a letter dated March 4, 1992, Karr Tuttle Campbell
("KTC"), attorneys for Sight & Sound Entertainment, Inc. ("S&S"),
alleged a breach of the Termination Agreement between S&S and Seller
dated July 12, 1991, relating to the Madigans' account which S&S had
purchased from Seller. KTC and Heller, Ehrman, White & McAuliffe
("HEW&M"), attorneys for Seller, exchanged letters relating to the
matter on behalf of their clients. KTC's letters are dated March 13
and March 19, 1992. HEW&M's letters are dated March 10, March 17 and
April 6, 1992. HEW&M's April 6 letter has a settlement agreement
attached thereto for S&S's signature. Copies of the referenced letters
and attachments, the Madigans' letter dated January 31, 1992
terminating S&S and Seller's agreement with the Madigans dated January
29, 1992 have been previously delivered to Buyer.
12. On March 16, 1991 Mr. John P. Cardosi of Popelka, Allard,
McCowan & Jones ("PAM&J"), attorneys for Melvin Simon & Associates
("MS&A"), informed HEW&M on behalf of Seller, of a lawsuit relating to
an injury which took place on MS&A's property. According to Mr.
Cardosi, a Mr. Cammarata was working on the roof of his client's
property carrying hot tar when he tripped over a wire attached to an
antennae which may have been owned by Seller. Mr. Cammarata suffered
burns resulting from such trip and is suing MS&A, among others, for
damages resulting from his accident. Seller believes that it did not
install the subject wires, but that it installed its antennae using
brackets (not wires). Seller believes that someone who installed
equipment subsequent to Seller's installation of its antennae at the
same site installed the subject wires. Seller has not been named in
Mr. Cammarata's law suit. A March 17, 1992 letter of PAM&J delivered
to HEW&M has been previously delivered to Buyer."
<PAGE>
(E) Pursuant to Section 6.8 of the Agreement, if the Closing occurs,
the Disclosures made herein will be effective to cure and correct for all
purposes any incorrectness or breach of any representation or warranty (whether
or not material) which would have existed by reason of Seller's not having made
any such Disclosure.
<PAGE>
Capitalized terms used herein but not defined herein have the meanings
ascribed to them in the Agreement.
Sincerely,
MUZAK LIMITED PARTNERSHIP
By Field/Muzak, Inc.
By: [SIGNATURE ILLEGIBLE]
----------------------------------
Title: President
cc: Rosenman & Colin
575 Madison Avenue
New York, New York 10022
Attention: Messrs. Michael Roth
Eric Lerner
<PAGE>
MUZAK LIMITED PARTNERSHIP
August 6, 1992
MLP Operating, L.P.
c/o Centre Partners, L.P.
One Rockefeller Plaza
New York, NY 10020
Attention: Messrs. Lester Pollack
Mark Jennings
Dear Sirs:
In connection with the Asset Purchase Agreement ("Agreement"), dated
as of March 11, 1992, between Muzak Limited Partnership ("Seller", The Field
Corporation and Field/Muzak, Inc. and MLP Operating, L.P. ("Buyer"), as amended
by Seller's Letter to Buyer, dated April 22, 1992, Amendment No. 1, dated as of
June 26, 1992, among the parties to the Agreement and Amendment No. 2, dated as
of July 31, 1992, among the parties to the Agreement, Seller hereby notifies you
of the following items without making any representation or warranty as to
whether such notification as to any item alone or together with any other item
or items is required to be disclosed pursuant to Section 6.4(a)(iii) of the
Agreement:
1. Seller has received and paid a commercial rent tax audit
assessment from the City of New York in the amount of $41,150.08. The tax
assessment relating to the commercial rent tax audit is attached hereto as
Exhibit A.
2. On Tuesday, May 19, 1992, Seller, through its registered agent,
was served with a summons and complaint captioned Charles F. Cammarata v. The
---------------------------
Fairmont Hotel and Pavilion of San Jose, et al., including Seller as Doe Six.
- -----------------------------------------------
Mr. Cammarata seeks damages of $2,665,000. On July 2, 1992, Seller filed a
General Denial. Copies of the Summons and Complaint and General Denial are
attached hereto as Exhibit B.
<PAGE>
MLP Operating, L.P.
August 6, 1992
Page 2
3. On May 31, 1992, James Boggins, Vice President - Western Region
of Seller, left the employment of Seller. Seller has executed a severance
arrangement with Mr. Boggins and has obtained a release from Mr. Boggins
relating to claims arising from his severance.
4. On April 2, 1992, Bahia Murdoch, an account executive in Seller's
Tustin office, was terminated for insubordination. Through counsel, Ms. Murdoch
has submitted a demand letter to Seller, claiming breach of contract and race
discrimination. Seller has responded to Ms. Murdoch's demand by letter dated
July 6, 1992. Copies of these letters are attached hereto as Exhibit C. Ms.
Murdoch also submitted a claim to the Labor Commissioner of the State of
California claiming that commissions due her on certain sales she made while
employed by Seller were not paid. Seller believes the subject commissions are
not yet payable because the sales relating thereto have not been consummated.
Ms. Murdoch's claim was denied and she appealed such denial.
5. On June 23, 1992, Seller notified its Milwaukee Licensee,
Wisconsin Music Network, Inc. ("WMNI"), of its intention to terminate their
relationship if WMNI does not execute Seller's new form of license agreement
within 60 days. Discussions are continuing between Seller and WMNI.
6. Seller is in the final stages of discussions with Music, Inc.,
its Washington D.C. Licensee, relating to its execution of the new form of Muzak
license agreement. If Seller's differences wit Music, Inc. are not
satisfactorily resolved, Seller will terminate its relationship with Music, Inc.
7. On May 15, 1992, James Wilson, General Manager of Seller's
Portland office, left the employment of Seller.
8. On June 25, 1992, Seller renewed its sub-carrier agreement with
the University of Washington, KUOW Radio.
9. Seller has elected not to renew its lease for premises at 125 N.
Acacia Avenue in San Diego, California, effective as of July 31, 1992.
10. Seller has terminated its month-to-month lease for premises in
Anaheim, California as of March, 1992.
11. Seller has awarded salary increases in the ordinary course of
business to certain employees whose annual compensation is $50,000 or more.
<PAGE>
MLP Operating, L.P.
August 6, 1992
Page 3
12. In June, 1992, the United States District Court for the Southern
District of New York ruled on the motion of the American Society of Composers,
Authors and Publishers ("ASCAP") for an order fixing interim fees to be paid by
Seller pending negotiation of a new license agreement. The Court ordered that
the current fees paid by Seller to ASCAP be continued on an interim basis. The
Court's opinion and order is attached hereto as Exhibit D.
13. Seller has been advised the remediation of the cesspool at the
Westbury, New York facility is not required. A copy of a letter from Nassau
County Department of Health with respect to this matter is attached hereto as
Exhibit E.
14. A $550,000 payment of principal was made on the Torrance Note on
June 30, 1992. $874,831.66 of accrued interest remains outstanding under the
Torrance Note.
15. Seller believes that it will be in default of certain financial
covenants in the Seller Debt upon issuance of its June financial statements and
receipt of a notice of an event of default from the financial institutions party
to such Seller Debt.
16. Each Licensee listed on the attached Exhibit F has not signed a
consent relating to the amendment to the POP Agreement dated as of February 28,
1992.
17. Seller may not be in compliance with several states' franchising
laws as a result of Seller's potential default referenced in Item 15 of this
letter.
18. GTE Corp has developed a digital satellite transmission system
capable of delivering products competitive with Seller's products at reduced
cost which could lower the cost of doing business for competitors or potential
competitors of Seller.
19. The Anderson Little account referenced in Schedule 4.19(a)(ii)
has been cancelled. Seller has entered into the following contracts (on the
dates indicated) which involve payment to Seller in excess of $50,000 per annum:
(a) Walgreen, March 3, 1992, (b) Affiliated Foods Cooperative, Inc., May 6,
1992, (c) Dayton Hudson, June 16, 1992, (d) Carter Hawley Hale, June 30, 1992
and (e) GH Bass & Co., July 8, 1992.
<PAGE>
MLP Operating, L.P.
August 6, 1992
Page 4
20. The Fleet National Bank account referenced in such Schedule 4.3
will be cancelled shortly and a new contract will be executed.
21. Sight & Sound Entertainment, Inc. ("S&S") has alleged a breach of
the Termination Agreement between S&S and Seller dated July 12, 1991 and
discussions between S&S and Seller are continuing.
22. Track Records, which is listed on Schedules 4.19(a)(viii) and
4.20(d), no longer exists.
23. Seller is the subject of sales and use tax audits being conducted
by the Illinois Department of Revenue and New York Department of Finance and
personal property tax audits being conducted by each of the County of Sacramento
(California) and Clallam County (Washington).
<PAGE>
MLP Operating, L.P.
August 6, 1992
Page 5
Capitalized terms used herein but not defined herein have the meanings
ascribed to them in the Agreement.
Sincerely,
MUZAK LIMITED PARTNERSHIP
By: FIELD/MUZAK, INC.
general partner
By: [SIGNATURE ILLEGIBLE]
--------------------------------
Title: Vice President
-----------------------------
cc: Rosenman & Celin
575 Madison Avenue
New York, New York 10022
Attention: Messrs. Michael Roth
Eric Lerner
<PAGE>
MUZAK LIMITED PARTNERSHIP
August 20, 1992
MLP Operating, L.P.
c/o Centre Partners, L.P.
One Rockefeller Plaza
New York, New York 10020
Attention: Messrs. Lester Pollack
Mark Jennings
Dear Sirs:
Pursuant to Section 6.8 of the Asset Purchase Agreement, dated as of
March 11, 1992, between Muzak Limited Partnership ("Seller"), The Field
Corporation and Field/Muzak, Inc. and MLP Operating, L.P., as amended pursuant
to Seller's letter dated April 22, 1992 ("First Disclosure Letter") , Amendment
No. 1, dated as of June 26, 1992 and Amendment No. 2, dated as of July 31, 1992
("Agreement"), Seller hereby makes the following Disclosures:
(A) (1) Schedule 4.3 is amended by deleting, under the heading
"A.1", the following:
"(4) Winn-Dixie Stores, Inc. undated",
"-- Macy's Mall of America", and
"(11) San Francisco -- Walgreen Drug Company (Alameda), 6/11/75"
(2) Schedule 4.3 is further amended by inserting, under the
heading "'A.7", the following:
"WNTL507 77127 006331-000 MN"
(B) (1) Schedule 4.5(a) is amended by inserting, after the text in
item 5, the following:
"6. GTE Corp has developed a digital satellite transmission system
capable of delivering products competitive with Seller's products
at reduced cost which could lower the cost of doing business for
competitors or potential competitors of Seller."
(2) Schedule 4.5(b) is amended by deleting item (i) and
inserting, in lieu thereof, the following:
"(i) On Monday, August 17, 1992, at Seller's facility located at 25-34
Jackson Avenue, Long Island City, New York 11101, approximately
400 square feet of roof collapsed causing damage to, among other
things, tuners, amplifiers, racks, tools, test
<PAGE>
equipment, invoices and files. Seller believes damage will
exceed the $25,000 deductible under the insurance which may cover
the losses incurred."
(3) Schedule 4.5(b) is amended by inserting, after the phrase
next to item (v), the following:
"Seller has awarded salary increases in the ordinary course of
business to certain employees whose annual compensation is $50,000 or
more."
(4) Attachment A to Schedule 4.5(b) is amended by deleting the
following:
"Boggins, James 01/01/92 $4,900 4.3% $119,400
Wilson, James 01/01/92 $3,500 5.0% $73,500"
(C) Schedule 4.6 is amended by inserting, after item 4 inserted in
such Schedule pursuant to the First Disclosure Letter, the following:
"5. Reference is hereby made to the disclosure made in Schedule
4.22(b), paragraph 15, and such disclosure is incorporated
herein."
(D) Schedule 4.7 is amended by inserting, after the paragraph
inserted in such Schedule pursuant to the First Disclosure Letter, the
following:
"Seller has received and paid a commercial rent tax audit
assessment from the City of New York in the amount of $41,150.08."
(E) Schedule 4.9(b) is amended by inserting, under the heading "A.1",
the following:
"WNTL507 77127 006331-000 MN"
(F) Schedule 4.11 is amended by deleting items 10, 17, 18 and 32 and
inserting, in lieu of item 32, the following:
"32. Lease with respect to the rental of real property in
Tacoma, Washington.
Parties: Seller and Fred Roberson
Term: April 1, 1992, month to month
Rent: $200/mo.
Renewal Option: N/A
Purchase Option: None."
(G) Schedule 4.17 is amended by inserting, after the text in item
(i), the following:
"Seller has been advised that remediation of the cesspool at the
Westbury, New York facility is not required. A copy of a letter from
Nassau County
<PAGE>
Department of Health with respect to this matter was attached to the
Seller's letter to Buyer dated August 6, 1992 ("Notice Letter")."
(H) Schedule 4.18(g) is amended by inserting, after the text in item
1, the following:
"J. Boggins"
(I) (1) Schedule 4.19(a)(ii)1 is amended by deleting the reference
to the Anderson Little account and inserting the following:
"Walgreen dated March 3, 1992
Affiliated Foods Cooperative, Inc. dated May 6, 1992
Dayton Hudson dated June 16, 1992
Carter Hawley Hale dated June 30, 1992
GH Bass & Co. dated July 8, 1992
(2) Schedule 4.19 (a)(viii) is amended by deleting the reference
to Track Records.
(3) Schedule 4.19(b)C is amended by deleting all the text in the
right column of item 1, and inserting, in lieu thereof, the following:
"Soundcom TTY LTV
Australia
June 1, 1992"
(J) (1) Schedule 4.20(a) is amended by deleting item 1, and
inserting, in lieu thereof, the following:
"1. In June, 1992, the United States District Court for the Southern
District of New York ruled on the motion of the American Society
of Composers, Authors and Publishers ("ASCAP") for an order
fixing interim fees to be paid by Seller pending negotiation of a
new license agreement. The Court ordered that the current fees
paid by Seller to ASCAP be continued on an interim basis. The
Court's opinion and order was attached to the Notice Letter."
(2) Schedule 4.20(d) is amended by deleting the reference to
Track Records.
(K) Schedule 4.21 is amended by deleting item 20 and inserting, in
lieu thereof, the following:
"2O. See item 1 of Schedule 4.20(a).
21. Seller gave notice pursuant to the Seller Debt on August 14, 1992
that it had breach a financial covenant in the Seller Debt and, upon
receipt of a notice of an event of default from the financial
institutions party
<PAGE>
to such Seller Debt, would be in default under such debt."
(L) (1) Schedule 4.22 is amended by inserting, at the end of the
text in item 1 under the heading "4.22(a)", the following:
-------
"2. Seller may not be in compliance with several states,
franchising laws as a result of Seller's potential default referenced
in item 21 of Schedule 4.2l."
(2) Schedule 4.22 is amended by inserting, at the end of the
text in item 1 under the heading "4.22(b)", the following:
-------
"Illinois Department of Revenue - Sales/Use Tax
New York Department of Finance - Sales/Use Tax
County of Sacramento (California) - Personal Property Tax
Clallam County (Washington) - Personal Property Tax"
(3) Schedule 4.22 is further amended by deleting item 12, which
was inserted pursuant to the First Disclosure Letter, under the heading
"4.22(b)" and inserting, in lieu thereof, the following:
-------
"12. On Tuesday, May 19, 1992, Seller, through its registered
agent, was served with a summons and complaint captioned Charles F.
----------
Cammarata v. The Fairmont Hotel and Pavilion of San Jose. et al.,
----------------------------------------------------------------
including Seller as Doe Six. Mr. Cammarata seeks damages of
$2,665,000. On July 2, 1992, Seller filed a General Denial. Copies
of the Summons and Complaint and General Denial were attached to the
Notice Letter. Defense of the claim is continuing."
13. On April 2, 1992, Bahia Murdoch, an account executive in
Seller's Tustin office, was terminated for insubordination. Through
counsel, Ms. Murdoch has submitted a demand letter to Seller, claiming
breach of contract and race discrimination. Seller has responded to
Ms. Murdoch's demand by letter dated July 6, 1992. Copies of these
letters were attached to the Notice Letter. Ms. Murdoch also
submitted a claim to the Labor Commissioner of the State of California
claiming that commissions due her on certain sales she made
while employed by Seller were not paid. Seller believes the subject
commissions are not yet payable because the sales relating thereto
have not been consummated. Ms. Murdoch's claim was denied. She
appealed such denial and, on August 18, 1992, the
<PAGE>
commission advised that even if she was entitled to the commissions
they were, in any case, not yet payable.
14. S&S has alleged a breach of the Termination Agreement
between S&S and Seller dated July 12, 1991 and discussions between S&S
and Seller are continuing.
15. On August 17, 1992, Seller was served with Summons and
Complaint captioned Wisconsin Music Network, Inc, v. Muzak Limited
-----------------------------------------------
Partnership and certain related court filings. Certain of these
-----------
documents are attached hereto as Exhibit A to this Schedule 4.22."
(4) Schedule 4.22 is amended by inserting Exhibit A hereto as
Exhibit A to Schedule 4.22.
(L) Schedule 4.24 is amended by deleting the attachment thereto, in
its entirety, and substituting Exhibit B hereto therefor.
Pursuant to Section 6.8 of the Agreement, if the Closing occurs, the
Disclosures made herein will be effective to cure and correct for all purposes
any incorrectness or breach of any representation or warranty (whether or not
material) which would have existed by reason of Seller's not having made any
such Disclosure.
<PAGE>
Capitalized terms used herein but not defined herein have the meanings
ascribed to them in the Agreement.
Sincerely,
MUZAK LIMITED PARTNERSHIP
[SIGNATURE ILLEGIBLE]
By: /s/ Stephen J. Shumate
------------------------
Title: VICE PRESIDENT
cc: Roseman & Colin
575 Madison Avenue
New York, New York 10022
Attention: Messrs. Michael Roth
Eric Lerner
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
-------------------------------------------
AMENDMENT NO. 1 ("Amendment") dated as of June 26, 1992, to the Asset
Purchase Agreement ("Purchase Agreement"), dated as of March 11, 1992, among
MUZAK LIMITED PARTNERSHIP, a Delaware limited partnership ("Seller"),
FIELD/MUZAK, INC., a Delaware corporation ("General Partner"), THE FIELD
CORPORATION, a Delaware corporation ("TFC"), and MLP OPERATING, L.P., a Delaware
limited partnership ("Buyer"), as amended pursuant to Section 6.8 thereof by
Seller's letter dated April 22, 1992.
WHEREAS, Seller, General Partner, TFC and Buyer (collectively, the
"Parties") have entered into the Purchase Agreement, pursuant to which Buyer
agreed to purchase substantially all the non-cash assets of Seller and to assume
certain liabilities in connection therewith;
WHEREAS, the Parties have agreed to reduce the cash portion of the Purchase
Price, as set forth in Section 2.1 of the Purchase Agreement, from $54,950,000
to $44,950,000;
WHEREAS, in connection with such reduction of the cash portion of the
Purchase Price, the Parties have agreed that the fair market value of the assets
to be transferred to Buyer in consideration of the [**] is $10,000,000 rather
than $5,000,000;
WHEREAS, the Parties have agreed, in connection with such reduction of the
cash portion of the Purchase Price, to amend the provisions of Section 2.5 of
the Purchase Agreement relating to the Earn-Out Payment, so as to increase the
maximum amount of such Earn-Out Payment from $20,000,000 to $25,000,000 and to
make certain changes in the manner in which such Earn-Out Payment is to be
calculated, as more fully set forth below;
WHEREAS, the Parties have agreed that the requirement set forth in Section
5.5 of the Purchase Agreement that Buyer shall have received commitments to
subscribe for at least $15,000,000 of its equity interests be reduced to a
requirement that Buyer shall have received commitments to subscribe for at least
$12,000,000 of its equity interests;
WHEREAS, the Parties have agreed to modify certain limitations applicable
to Seller's obligations to indemnify Buyer Group Members as set forth in Section
10.2 of the Purchase Agreement; and
WHEREAS, the Parties have agreed to extend the deadline dates set forth in
Section 11.1 of the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, Seller, General Partner, TFC and Buyer hereby agree as
follows:
<PAGE>
1. Unless otherwise provided herein, capitalized terms used herein
shall have the meanings ascribed thereto in the Purchase Agreement, and Article,
Section and clause references refer to the Articles, Sections and clauses of the
Purchase Agreement.
2. The Parties hereby agree to amend the Purchase Agreement as
follows:
A. Purchase Price. The first sentence of Section 2.1 is hereby
--------------
amended to delete the amount "$54,950,000" appearing in the third line
thereof and to insert in lieu thereof the amount "$44,950,000", and the
first sentence of Section 2.4(b) is hereby amended to delete the amount
"$54,950,000" appearing in the fifth line thereof and to insert in lieu
thereof the amount "$44,950,000".
B. Earn-Out Payment. (i) Section 2.5(a) is hereby amended to read in
----------------
its entirety as follows:
"2.5. Earn-Out. (a) If (x) cumulative "EBITDA" (as
--------
hereinafter defined) for the period (the "Base Period")
commencing on the Closing Date and ending on the fifth
anniversary of the Closing Date (the "Determination Date")
is equal to or greater than the aggregate of the amounts set
forth in Schedule 2.5(a)(1) but is less than the aggregate
of the amounts set forth in Column I of Schedule 2.5(a) or
(y) on the occurrence of a Transfer Event (also a
"Determination Date") cumulative EBITDA is "On Plan" (as
hereinafter defined) as calculated pursuant to Schedule
2.5(a)(1) hereto but is not On Plan as calculated pursuant
to Schedule 2.5(a) hereto, Buyer shall make a payment to
Seller in the amount of FIVE MILLION DOLLARS ($5,000,000)
(such payment, or such other payment as is contemplated by
the next sentence of this Section 2.5(a), is hereinafter
referred to, as applicable, as the "Earn-Out Payment"),
which payment shall be discounted at the rate of 10% per
annum for the number of months (including the month of the
Determination Date) then remaining in the Base Period. If
(x) cumulative EBITDA for the Base Period is equal to or
greater than the aggregate of the amounts set forth in
column I of Schedule 2.5(a), or (y) on the occurrence of a
Transfer Event, cumulative EBITDA is On Plan as calculated
pursuant to Schedule 2.5(a)
2
<PAGE>
hereto, Buyer shall not be required to make the payment
referred to in the first sentence of this Section 2.5(a),
but rather Buyer shall make an Earn-Out Payment to Seller in
an amount equal to the sum (the "Sum") of (A) $11,670,000,
plus (B) an amount equal to the product of (1) $13,330,000
----
and (2) a fraction, the numerator of which shall be the
amount, if any, by which cumulative EBITDA for the period
from the Closing Date until the Determination Date exceeds
the aggregate of the amounts in column I of Schedule 2.5(a)
for such period, and the denominator of which shall be the
difference between the aggregate of the amounts in column I
and column II of Schedule 2.5(a) for the period from the
Closing Date until the Determination Date, which Sum shall
be discounted with respect to the first $5,000,000 thereof
at the rate of 10% per annum for the number of months
(including the month of the Determination Date) then
remaining in the Base Period and which Sum shall be
discounted with respect to the balance thereof in excess of
said $5,000,000 at the rate of 25% per annum for the number
of months (including the month of the Determination Date)
then remaining in the Base Period; provided, that, the Earn-
-------- ----
Out Payment shall in no event exceed $25,000,000;"
(ii) Section 2.5(c)(3) is hereby amended to read in its entirety
as follows:
"(3) cumulative EBITDA shall be deemed to be "On Plan"
at any date if cumulative EBITDA as of such date shall equal
or exceed the aggregate of the amounts set forth (i) in
Schedule 2.5(a)(1) for purposes of the calculations
contemplated by the first sentence of Section 2.5(a) for the
period from the Closing Date to the end of the month prior
to such date and (ii) in Column I of Schedule 2.5(a) for
purposes of the calculations contemplated by the second
sentence of Section 2.5(a) for the period from the Closing
Date to the end of the month prior to such date; provided,
--------
that for purposes of this Section 2.5, if cumulative EBITDA
at any date following the Closing Date shall be On Plan as
calculated pursuant to both Schedule 2.5(a)(1) and Schedule
2.5(a), the provisions of the second sentence of Section
2.5(a) shall
3
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
control for purposes of calculating the Earn-Out Payment,
and the parties hereby acknowledge and agree that under no
circumstances will the Earn Out Payment be calculated under
both the first and second sentences of Section 2.5(a); and"
C. Schedules 2.5(a)(1) and 2.5(a). A new Schedule 2.5(a)(1) is
------------------------------
hereby added to the Purchase Agreement to read in its entirety as set forth
in Exhibit 1 hereto. Schedule 2.5(a) to the Purchase Agreement is hereby
deleted therefrom and a new Schedule 2.5(a) is hereby added to the Purchase
Agreement to read in its entirety as set forth in Exhibit 2 hereto.
D. [**]. The first sentence of Section 7.14 is hereby amended to
----
delete the amount "$5,000,000" appearing in the fifth and 21st lines
thereof and to insert in lieu thereof in each case the amount
"$10,000,000". The form of the Amended Partnership Agreement annexed as
Exhibit E to the Purchase Agreement, as referred to in Section 7.21, is
hereby amended as follows:
(i) the definition of "Agreed Value" set forth in
Article I is hereby amended to delete the phrase "Five Million
Dollars ($5,000,000)" appearing in the eighth line thereof and to
insert in lieu thereof the phrase "Ten Million Dollars
($10,000,000)";
(ii) the definition of "[**]" set forth in Article I is hereby
amended to delete the phrase "Five Million Dollars ($5,000,000)" appearing
in the third line thereof and to insert in lieu thereof the phrase "Ten
Million Dollars ($10,000,000)"; and
(iii) the definition of "Net Agreed Value" set forth
in Article I is hereby amended to delete the phrase "Five Million
Dollars ($5,000,000)" in the fifth line thereof and to insert in
lieu thereof the phrase "Ten Million Dollars ($10,000,000)".
E. Buyer Equity Commitment. The first sentence of Section
-----------------------
5.5 is hereby amended to delete the amount "$15,000,000"
appearing in the second line thereof and to insert in lieu
thereof the amount "$12,000,000".
F. Indemnification. The first sentence of Section 10.4 is
---------------
hereby amended to delete the amount "$17,000,000" appearing in
the 21st line thereof and to insert in lieu thereof the amount
"$7,000,000".
4
<PAGE>
G. Closing Date. The first sentence of Section 11.1 is
------------
hereby amended (i) to delete the phrase "April 30, 1992"
appearing in the 7th, 13th and 14th lines of said Section 11.1
and to insert in lieu thereof in each case the phrase "June 30,
1992", (ii) to delete the phrase "June 30, 1992" appearing in the
8th and 22nd lines of said Section 11.1 and to insert in lieu
thereof the phrase "July 31, 1992" and (iii) to insert the
following phrase after the word "parties" in the 22nd line
thereof: "provided, that, following an extension of the
-------- ----
Termination Date to July 31, 1992, Buyer may further extend such
Termination Date to August 31, 1992 by delivering to Seller on or
prior to July 31, 1992 (but not earlier than July 24, 1992) the
following certificates, each of which shall be dated not earlier
than July 24, 1992: (A) a certificate signed on behalf of Buyer
by a duly authorized officer of MLP Acquisition notifying Seller
that Buyer has elected to extend the Termination Date to August
31, 1992 and setting forth the following: (1) a statement that
Buyer is continuing to take action in good faith to cause
fulfillment of the conditions to Closing as soon as practicable,
(2) a statement to the effect that Buyer has reason to believe
that one or more of the conditions to Closing set forth in
Article VIII is not likely to be met as of July 31, 1992 and
identifying such condition(s) and (3) a statement to the effect
that, as of the date of such certificate, Buyer is not aware of
any facts or circumstances that would cause the nonfulfillment as
of such date of the condition set forth in Section 8.2 if such
date were the Closing Date (or, if Buyer is aware of any such
facts or circumstances, describing same in reasonable detail and
setting forth Buyer's agreement to waive any nonfulfillment as of
the actual Closing Date of any condition set forth in Section 8.2
based on the existence of such facts or circumstances or based on
any related qualification of the officer's certificates required
to be delivered by Seller pursuant to such Section, as well as a
waiver of the right of Buyer to terminate the Agreement pursuant
to Section 11.1(c) based on such facts or circumstances); and (B)
a separate certificate from each of Centre Partners L.P., Music
Holdings Corp., MLP Acquisition, Centre Capital Investors L.P.,
Barclays Bank PLC ("Barclays") and Union Bank of Switzerland
("UBS") (each a "Financing Person"), signed by a duly authorized
officer of such Financing Person, setting forth: (1) a statement
to the effect that the termination date for such Financing
Person's financing commitment(s) described in Section 5.5 has
been extended to at least August 31, 1992, and, (2) a statement
to the effect that, as of the date of such certificate, such
5
<PAGE>
Financing Person is not aware of any facts or circumstances
relating to the progress of the Seller's in-store marketing
program developed on behalf of The Fleming Companies Inc. and
such Financing Person (other than UBS and Barclays) is not aware,
and in the case of UBS and Barclays, without independent inquiry
is not aware, of any facts and circumstances that would cause the
nonfulfillment as of such date of the conditions set forth in
Section 8.2 if such date were the Closing Date, in each case that
would cause the nonfulfillment as of such date of any of the
conditions to the financing obligations of such Financing Person
if such date were the Closing Date (or, if such Financing Person
is aware of any such facts or circumstances, describing same in
reasonable detail and agreeing to waive any nonfulfillment as of
the actual Closing Date of any such condition based on the
existence of such facts or circumstances), and in such event the
Termination Date shall be no later than August 31, 1992 unless
otherwise agreed by the parties;".
3. Seller Authority; Enforceability. Each of Seller, General Partner (on
--------------------------------
behalf of Seller and itself) and TFC has the partnership power and authority to
execute, deliver and perform this Amendment. The execution, delivery and
performance of this Amendment by each of Seller, General Partner (on behalf of
Seller and itself) and TFC has been duly authorized and approved by all
requisite corporate and partnership action, as applicable. This Amendment has
been duly authorized, executed and delivered by each of Seller, General Partner
(on behalf of Seller and itself) and TFC and is the legal, valid and binding
obligation of each of Seller, General Partner and TFC, enforceable in accordance
with its terms.
4. Buyer Authority; Enforceability. Buyer has full power and authority to
-------------------------------
execute, deliver and perform this Amendment. The execution, delivery and
performance of this Amendment by Buyer has been duly authorized and approved by
all requisite partnership action. This Amendment has been duly authorized,
executed and delivered by Buyer and is the legal, valid and binding obligation
of Buyer, enforceable in accordance with its terms.
5. Purchase Agreement. Except as specifically set forth herein, the
------------------
Purchase Agreement shall remain in full force and effect. On and after the date
hereof, each reference in the Purchase Agreement to "this Agreement", "the
Purchase Agreement", "hereunder", "hereof", or words of like import referring to
the Purchase Agreement, and each reference in every other Seller Ancillary
Agreement or Buyer Ancillary Agreement to the "Purchase Agreement",
"thereunder", "thereof", or other words of like import referring to the Purchase
Agreement, shall mean the Purchase Agreement as amended by this Amendment.
Notwithstanding this Amendment, each reference in the Purchase Agreement to "the
date hereof" or to "the date of this Agreement" shall be deemed to refer to
March 11, 1992 and not to the date of this Amendment.
6
<PAGE>
6. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
7. Entire Agreement; Amendments. This Amendment and the Exhibit referred
----------------------------
to herein, together with the Purchase Agreement, contain the entire
understanding of the parties hereto with regard to the subject matter contained
herein or therein, and supersede all prior agreements or understandings between
or among any of the parties hereto, including the letter of intent (the "Letter
of Intent") dated December 20, 1991 among Seller, TFC and CCI, as amended, the
Confidentiality Agreement (which shall survive any termination of this
Agreement) and any disclosure made or omitted pursuant to the Private and
Confidential Muzak Limited Partnership Review Document dated July 1991 delivered
to Buyer with respect to the Business, as to which no representation or warranty
is made. This Amendment shall not be amended, modified or supplemented except
by a written instrument signed by an authorized representative of each of the
Parties.
8. Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the internal laws (as opposed to the conflicts of law
provisions) of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the day and year first above written.
MUZAK LIMITED PARTNERSHIP MLP OPERATING, L.P.
By: FIELD/MUZAK, INC. By: MLP ACQUISITION, L.P.
General Partner Managing General Partner
By: MUSIC HOLDINGS CORP.
By: [SIGNATURE ILLEGIBLE] General Partner
-----------------------
Title: Vice President
and Treasurer
By: [SIGNATURE ILLIGIBLE]
--------------------------
FIELD/MUZAK, INC. Title:
By: [SIGNATURE ILLEGIBLE]
---------------------------
Title: Vice President
and Treasurer
THE FIELD CORPORATION
By: [SIGNATURE ILLEGIBLE]
---------------------------
Title: Vice President
and Treasurer
7
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT
-------------------------------------------
AMENDMENT NO. 2 ("Amendment") dated July 31, 1992, to the Asset Purchase
Agreement, dated as of March 11, 1992, among MUZAK LIMITED PARTNERSHIP, a
Delaware limited partnership ("Seller"), FIELD/MUZAK, INC., a Delaware
corporation ("General Partner"), THE FIELD CORPORATION, a Delaware corporation
("TFC"), and MLP OPERATING, L.P., a Delaware limited partnership ("Buyer"), as
amended pursuant to Section 6.8 thereof by Seller's letter dated April 22, 1992,
and as further amended by Amendment No. 1 thereto, dated as of June 26, 1992
("Purchase Agreement").
WHEREAS, Seller, General Partner, TFC and Buyer (collectively, the
"Parties") have entered into the Purchase Agreement, pursuant to which Buyer
agreed to purchase substantially all the non-cash assets of Seller and to assume
certain liabilities in connection therewith;
WHEREAS, the Parties have agreed to reduce the cash portion of the Purchase
Price, as set forth in Section 2.1 of the Purchase Agreement, from $44,950,000
to $43,450,000;
WHEREAS, in connection with such reduction of the cash portion of the
Purchase Price, the Parties have agreed that the fair market value of the assets
to be transferred to Buyer in consideration of the [**] is $8,000,000 rather
than $10,000,000;
WHEREAS, the Parties have agreed, in connection with such reduction of the
cash portion of the Purchase Price, to amend the provisions of Section 2.5 of
the Purchase Agreement relating to the Earn-Out Payment to make certain changes
in the manner in which such Earn-Out Payment is to be calculated, as more fully
set forth below, and to limit the maximum amount of such Earn-Out Payment to
$24,000,000;
WHEREAS, concurrently with the execution hereof Buyer has delivered to
Seller Buyer's notification of the extension of the Termination Date pursuant to
Section 11.1 of the Purchase Agreement (as modified by Section 2.E. hereof) to
August 31, 1992;
WHEREAS, the Parties have agreed to (i) amend the definition of "Assumed
Liabilities" as set forth in Section 1.3 of the Purchase Agreement so as to
exclude therefrom Buyer's assumption of Seller's liability and obligation for
the June 30, 1992 payment made by Seller in respect of the Torrance Note and
(ii) amend the definition of "Excluded Liabilities" as set forth in Section 1.4
of the Purchase Agreement so as to include therein Seller's retention of the
liabilities and obligations for the June 30, 1992 payment made by Seller in
respect of the Torrance Note; and
<PAGE>
WHEREAS, the Parties have agreed to modify certain limitations applicable
to Seller's obligations to indemnify Buyer Group members as set forth in Section
10.2 of the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, Seller, General Partner, TFC and Buyer hereby agree as
follows:
1. Unless otherwise provided herein, capitalized terms used herein
shall have the meanings ascribed thereto in the Purchase Agreement, and Article,
Section and clause references refer to the Articles, Sections and clauses of the
Purchase Agreement.
2. The Parties hereby agree to amend the Purchase Agreement as
follows:
A. Purchase Price. The first sentence of Section 2.1 is
--------------
hereby amended to delete the amount "$44,950,000" appearing in
the third line thereof and to insert in lieu thereof the amount
"$43,450,000", and the first sentence of Section 2.4(b) is hereby
amended to delete the amount "$44,950,000" appearing in the fifth
line thereof and to insert in lieu thereof the amount
"$43,450,000".
B. Torrance Note. (i) Section 1.3(ii) is hereby amended
-------------
to add the following phrase after the word "Note" appearing in
the fourth line thereof:
"(other than Seller's liabilities and obligations
for the payment of the $550,000 June 30, 1992
installment (the "Excluded Installment") in
respect of the Torrance Note);
(ii) Section 1.4 is hereby amended to delete the word
"and" at the end of subsection (v) thereof, to add the word "and"
at the end of subsection (vi) thereof, and to add a new
subsection "(vii)" thereto to read in its entirety as follows:
"(vii) liabilities and obligations relating solely to
payment of the Excluded Installment."
(iii) Section 2.3(c) is hereby amended to delete the
amount "2,865,000" from the second, fourth, fifth and seventh
lines thereof, and to insert in lieu thereof the amount
"3,415,000".
C. Earn-Out Payment. The second sentence of Section 2.5(a)
is hereby amended to (i) delete the amount "$11,670,000"
appearing in the twelfth line thereof and
2
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
to insert in lieu thereof the amount "$12,000,000", (ii) delete
the amount "$13,330,000" appearing in the thirteenth line thereof
and to insert in lieu thereof the amount "$12,000,000", and (iii)
delete the amount "$25,000,000" appearing in the last line
thereof and to insert in lieu thereof the amount "$24,000,000".
D. Indemnification. The first sentence of Section 10.4 is
---------------
hereby amended to delete the amount "$7,000,000" appearing in the
21st line thereof and to insert in lieu thereof the amount
"$5,500,000".
E. Termination Date. The Parties acknowledge and agree
----------------
that notwithstanding anything to the contrary set forth in
Section 11.1 of the Purchase Agreement, pursuant to Buyer's
notification delivered to Seller concurrently with the execution
hereof (which notification is attached as Exhibit 1 hereto),
accompanied by the letters of Union Bank of Switzerland, New York
Branch, and of Barclays Bank PLC delivered to Seller concurrently
with the execution hereof (which letters are attached as Exhibit
2 hereto), the Termination Date has been extended to August 31,
1992 and Seller, General Partner and TFC hereby waive the
requirements of subclauses (A) and (B) of the second proviso to
the first sentence of Section 11.1
F. [**]. The first sentence of Section 7.14 is hereby amended to
----
delete the amount "$10,000,000" appearing in the fifth and 21st lines
thereof and to insert in lieu thereof in each case the amount "$8,000,000".
The form of the Amended Partnership Agreement annexed as Exhibit E to the
Purchase Agreement, as referred to in Section 7.21, is hereby amended as
follows:
(i) the definition of "Agreed Value" set forth in
Article I is hereby amended to delete the phrase "Ten Million
Dollars ($10,000,000)" appearing in the eighth line thereof and
to insert in lieu thereof the phrase "Eight Million Dollars
($8,000,000)";
(ii) the definition of [**] set forth in Article I is hereby
amended to delete the phrase "Ten Million Dollars ($10,000,000)" appearing
in the third line thereof and to insert in lieu thereof the phrase "Eight
Million Dollars ($8,000,000)"; and
(iii) the definition of "Net Agreed Value" set forth
in Article I is hereby amended to delete the phrase "Ten Million
Dollars ($10,000,000)" in the fifth line
3
<PAGE>
thereof and to insert in lieu thereof the phrase "Eight Million
Dollars ($8,000,000)".
G. Non Compete. The Parties agree that the aggregate consideration
-----------
to be reflected on Schedule 1 to the Non-Competition Agreement shall be
$50,000.00.
H. Additional Covenant. A new Section 7.31 shall be added to Article
-------------------
VII of the Agreement to read in its entirety as follows:
"7.31 Tax Matters. The Parties have heretofore discussed and
-----------
considered Seller's contributing certain assets located in the States of
California, New York and Washington to one or more subsidiary partnerships
to be owned by Seller and/or an Affiliate of Seller and transferring 100
percent of the partnership interests in such partnerships and the equity of
such Affiliate to Buyer and/or its designee as part of the Closing. The
Parties shall negotiate in good faith a reasonable resolution of the issues
relating to the implementation of the foregoing transactions prior to
Closing, provided however that Seller shall not be entitled to refuse to
-------- -------
Close and/or terminate this Agreement as a result of failure by the Parties
to reach such resolution as a result of disputes relating to the
reasonableness of the tax reporting position to be taken in any such state
with respect to such transactions unless (i) Seller shall have delivered to
------
Buyer letters from each of Arthur Andersen & Co. and Sidley & Austin (or
other counsel reasonably acceptable to Buyer) with respect to each such
state to the effect that the tax reporting position to be taken in each
such state regarding such transactions is reasonable and (ii)
---
notwithstanding receipt of such letters, Buyer nevertheless refuses to
implement such transactions in such state or Buyer otherwise does not agree
to make Seller economically whole at Closing for the tax effect that would
have been realized had such transactions been effected in such state.
Buyer and Seller agree to share equally the costs of obtaining such
letters."
3. Seller Authority; Enforceability. Each of Seller, General Partner (on
--------------------------------
behalf of Seller and itself) and TFC has the partnership power and authority to
execute, deliver and perform this Amendment. The execution, delivery and
performance of this Amendment by each of Seller, General Partner (on behalf of
Seller and itself) and TFC has been duly authorized and approved by all
requisite corporate and partnership action, as applicable. This Amendment has
been duly authorized, executed and delivered by each of Seller, General Partner
(on behalf of Seller and itself) and TFC and is the legal, valid and binding
obligation of each of Seller, General Partner and TFC, enforceable in accordance
with its terms.
4
<PAGE>
4. Buyer Authority; Enforceability. Buyer has full power and authority to
-------------------------------
execute, deliver and perform this Amendment. The execution, delivery and
performance of this Amendment by Buyer has been duly authorized and approved by
all requisite partnership action. This Amendment has been duly authorized,
executed and delivered by Buyer and is the legal, valid and binding obligation
of Buyer, enforceable in accordance with its terms.
5. Purchase Agreement. Except as specifically set forth herein, the
------------------
Purchase Agreement shall remain in full force and effect. On and after the date
hereof, each reference in the Purchase Agreement to "this Agreement", "the
Purchase Agreement", "hereunder", "hereof", or words of like import referring to
the Purchase Agreement, and each reference in every other Seller Ancillary
Agreement or Buyer Ancillary Agreement to the "Purchase Agreement",
"thereunder", "thereof", or other words of like import referring to the Purchase
Agreement, shall mean the Purchase Agreement as amended by this Amendment.
Notwithstanding this Amendment, each reference in the Purchase Agreement to "the
date hereof" or to "the date of this Agreement" shall be deemed to refer to
March 11, 1992 and not to the date of this Amendment.
6. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
7. Entire Agreement; Amendments. This Amendment and the Exhibit referred
----------------------------
to herein, together with the Purchase Agreement, contain the entire
understanding of the parties hereto with regard to the subject matter contained
herein or therein, and supersede all prior agreements or understandings between
or among any of the parties hereto, including the letter of intent (the "Letter
of Intent") dated December 20, 1991 among Seller, TFC and CCI, as amended, the
Confidentiality Agreement (which shall survive any termination of this
Agreement) and any disclosure made or omitted pursuant to the Private and
Confidential Muzak Limited Partnership Review Document dated July 1991 delivered
to Buyer with respect to the Business, as to which no representation or warranty
is made.
5
<PAGE>
This Amendment shall not be amended, modified or supplemented except by a
written instrument signed by an authorized representative of each of the
Parties.
8. Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the internal laws (as opposed to the conflicts of law
provisions) of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the day and year first above written.
MUZAK LIMITED PARTNERSHIP MLP OPERATING, L.P.
By: FIELD/MUZAK, INC. By: MLP ACQUISITION, L.P.
General Partner Managing General Partner
By: MUSIC HOLDINGS CORP.
By:_________________________ General Partner
Title:
/s/ Mark E. Jennings
By:---------------------------
FIELD/MUZAK, INC. Title: Vice President
By:_________________________
Title:
THE FIELD CORPORATION
By:_________________________
Title:
6
<PAGE>
This Amendment shall not be amended, modified or supplemented except by a
written instrument signed by an authorized representative of each of the
Parties.
8. Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the internal laws (as opposed to the conflicts of law
provisions) of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the day and year first above written.
MUZAK LIMITED PARTNERSHIP MLP OPERATING, L.P.
By: FIELD/MUZAK, INC. By: MLP ACQUISITION, L.P.
General Partner Managing General Partner
/s/ Ronald J. Smith By: MUSIC HOLDINGS CORP.
By:------------------------- General Partner
Title: Vice President
By:___________________________
FIELD/MUZAK, INC. Title:
/s/ Ronald J. Smith
By:-------------------------
Title: Vice President
THE FIELD CORPORATION
/s/ Ronald J. Smith
By:-------------------------
Title: Vice President
6
<PAGE>
Amendment No. 3 To Asset Purchase Agreement
-------------------------------------------
AMENDMENT NO. 3 ("Amendment") dated as of August 26, 1992, to the Asset
Purchase Agreement ("Purchase Agreement") dated as of March 11, 1992, among
Muzak Limited Partnership, a Delaware limited partnership ("Seller"),
Field/Muzak, Inc., a Delaware corporation ("General Partner"), The Field
Corporation, a Delaware corporation ("TFC"), and MLP Operating, L.P., a Delaware
limited partnership ("Buyer"), as amended pursuant to Section 6.8 thereof by
Seller's letters dated April 22, 1992 and August 20, 1992, and as further
amended by Amendment No. 1 thereto dated as of June 26, 1992 and Amendment No. 2
thereto dated July 31, 1992 ("Purchase Agreement"), and solely for the purposes
of Sections 2.A, 2.G(a) and 2.V of this Amendment, Muzak Investment Partners,
L.P., a limited partnership organized under the laws of Delaware ("MIP"), and
solely for the purposes of Sections 2.U and 3 of this Amendment, MLP
Communications Company, a general partnership formed under the laws of the State
of Washington (the "FCC Partnership").
WHEREAS, Seller, General Partner, TFC and Buyer (collectively, the
"Parties") have entered into the Purchase Agreement, pursuant to which Buyer
agreed to purchase substantially all the non-cash assets of Seller and to assume
certain liabilities in connection therewith;
WHEREAS, in order to facilitate the transactions contemplated by the
Purchase Agreement, the Parties desire to amend the Purchase Agreement to
reflect, among other things, (i) the Transfer of certain of the Purchased Assets
from Seller to certain general partnerships owned by Seller and Melody, Inc. of
Delaware ("Corporate Partner"), a Delaware corporation and a wholly owned
subsidiary of Seller; particularly, concurrently with the execution hereof
Seller is Transferring the Purchased Assets identified in Exhibit A hereto (the
"Specified Assets") to the respective partnerships set forth in Exhibit A hereto
(the "Subsidiary Partnerships") pursuant to the respective Transfer Agreements
referenced in Item 2 of Exhibit A hereto (the "Transfer Agreements") and (ii)
the Transfer by Seller to MIP of Seller's general partnership interests (the
"California GP Interests") in Melody California Partnership and the subsequent
Transfer at Closing by MIP to Buyer of the California GP Interests pursuant to
the transfer agreement referenced in Item 3 of Exhibit A hereto (the "GP
Transfer Agreement");
WHEREAS, Seller owns all of the outstanding shares (the "Shares") of common
stock, par value $.01 per share, of the Corporate Partner;
WHEREAS, Seller and Corporate Partner own all of the general partner
interests (the "GP Interests") in each of the Subsidiary Partnerships, in the
respective percentages set forth in Exhibit A hereto and for the capital
contributions set forth in said
<PAGE>
Exhibit A (being the Specified Assets in the case of Seller and being cash in
the case of the Corporate Partner) and pursuant to the respective Partnership
Agreements of each Subsidiary Partnership referenced in Exhibit A hereto;
WHEREAS, in connection with the foregoing Transfer of Specified Assets to
the Subsidiary Partnerships, Seller desires to Transfer to Buyer, and Buyer
desires to purchase from Seller, the GP Interests and the Shares owned by Seller
and to purchase from MIP the California GP Interests to be owned by MIP;
WHEREAS, the Parties further desire to amend the Purchase Agreement to
reflect the Transfer by Seller to the FCC Partnership, all of the general
partner interests of which are owned by MLP Acquisition and the Administrative
General Partner in the respective percentages set forth in Exhibit B hereto, of
the Purchased Assets set forth in Exhibit B hereto (the "FCC Assets"), other
than the "Applications" identified in Section C. of said Exhibit B;
WHEREAS, the Parties desire to amend the Purchase Agreement to replace the
form of Management Option Plan set forth in Schedule 5.5 to the Purchase
Agreement with the form of Management Option Plan attached as Exhibit E hereto
and to supplement, amend and modify certain of the other items included in said
Schedule 5.5; and
WHEREAS, the Parties desire to implement certain modifications to clarify
the methodology for the calculation of the Closing Payment, the Earn-Out Payment
and certain other payments to be made to Seller and/or Buyer so as to
accommodate the Closing occurring on September 4, 1992.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Parties hereby agree as follows:
1. Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings ascribed to them in the Purchase Agreement, and Article,
Section and clause references refer to the Articles, Sections and clauses of the
Purchase Agreement.
2. The Parties hereby agree to amend the Purchase Agreement as follows:
A. The GP Interests and the Shares owned by Seller and the California
GP Interests to be owned by MIP shall be included as "Purchased Assets" for all
purposes of the Purchase Agreement and the term "Business" shall for all
purposes include the Specified Assets, cash and operations of the Subsidiary
Partnerships and Corporate Partner (it being understood that such Specified
Assets and cash are not being directly Transferred to Buyer by Seller, and it
being further understood that nothing herein shall derogate from Buyer's and
Seller's respective obligations under Section 1.7 of the Purchase Agreement). In
this regard, but not in limitation of the foregoing, (i) the first "WHEREAS"
clause of the Purchase Agreement is hereby amended to add the phrase "directly
and indirectly through the Subsidiary Partnerships" after the word "Seller" in
the first line thereof;
2
<PAGE>
(ii) Section 1.1 of the Purchase Agreement is hereby amended as follows: the
phrase ", and in the case of the California GP Interests, MIP shall Transfer to
Buyer, and Buyer shall purchase and acquire from MIP the California GP
Interests" shall be added after the word "Seller" in the sixth line of said
Section 1.1; (iii) the phrase ", and in the case of the California GP Interests,
all of MIP's right, title and interest," shall be added after the word
"Seller's" in the eighth and fifteenth lines of said Section 1.1; (iv) the
phrase "and in the case of the California GP Interests by MIP" shall be added
after the word "Seller" in the eleventh line of said Section 1.1; and (v) the
word "and" at the end of clause (xx) shall be deleted, a new clause (xxi) shall
be added to read in its entirety as follows: "the GP Interests and the Shares
owned by Seller and the California GP Interests to be owned by MIP, and", clause
"(xxi)" shall be renumbered as clause "(xxii)" and "(xxi)" shall be substituted
for the last roman numeral (i.e., "(xx)") in such clause.
----
B. For all intents and purposes of the Purchase Agreement, all
references to the Transfer of Purchased Assets to Buyer shall, to the extent
applicable to the FCC Assets, mean the transfer thereof to the FCC Partnership,
and all references to Assumed Liabilities to be assumed by Buyer shall, to the
extent applicable to the FCC Assets, mean assumption thereof by the FCC
Partnership. In this regard, but not in limitation of the foregoing, the phrase
"or, in the case of the "FCC Assets" (as defined in Schedule 7.29 hereto), to
the FCC Partnership" shall be added after the word "Buyer" in the fifth line of
Section 1.1 of the Purchase Agreement, and the phrase ", or in the case of the
FCC Assets, the FCC Partnership" shall be added after the word "Buyer" in the
sixth line of said Section 1.1.
C. Section 2.5(d)(i) is hereby amended to add the phrase "or to
secure the "Specified Debt" (as such term is defined in the Amended Partnership
Agreement)" after the word "business" in the third line thereof. Section
2.5(d)(v) is hereby amended (i) to add the phrase "Unless Seller or the holders
of the Earn-Out Note consent thereto," before the word "Buyer" in the first line
thereof, (ii) to add the phrase "(which for purposes of this sentence only shall
include the "Put/Call Units", as such term is defined in the Amended Partnership
Agreement)" after the word "interests" in the fourth line thereof, (iii) to add
the phrase ", including for these purposes options issuable under the Management
Option Plan" after the word "Date" in the ninth line thereof, (iv) to add the
phrase "and (z) distributions by any Subsidiary to the Buyer" after the
reference "(y)" in the last line of said first sentence, and (v) to add the
phrase "(or their Affiliates)" after the word "financing" in the 13th line of
the second sentence thereof and to add the phrase ", including without
limitation the Put/Call Units and/or securities contemplated by Section 11.01
(f) of the Amended Partnership Agreement pursuant to the conversion and
3
<PAGE>
issuance provisions thereof" after the word "thereof" in the last line of the
second sentence thereof.
D. Section 1.3 is hereby amended to delete the word "and" at the end
of clause (viii) thereof, to renumber existing clause "(ix)" as clause "(x)",
and to add a new clause (ix) to read in its entirety as follows: "(ix)
liabilities and obligations of the Subsidiary Partnerships and/or of the
Corporate Partner arising or accruing from and after the Closing Date other than
sales, use or other similar Taxes to the extent provided in Section 1.7."
E. Section 1.4 is hereby amended to delete the word "and" at the end
of clause (v) thereof, to renumber existing clause "(vi)" as clause "(vii)", and
to add a new clause (vi) to read in its entirety as follows: "(vi) liabilities
and obligations of the Subsidiary Partnerships and/or of the Corporate Partner
arising or accruing prior to the Closing Date other than sales, use or other
similar Taxes to the extent provided in Section 1.7."
F. (a) The phrase "and, if applicable to the FCC Assets, the FCC
Partnership" shall be added after the word "Buyer" in the fourth line of Section
1.3, and in each place such word appears in Sections 1.5 and 1.6.
(b) Section 1.7 is hereby amended (i) to add the word "similar"
after the word "other" in the third line thereof and (ii) to add the following
sentence after the first sentence thereof: "Seller, on the one hand, and Buyer,
on the other hand, also shall each be responsible for one-half (1/2) of all
sales, use or other similar Taxes imposed on the Seller's contribution of the
Specified Assets to the respective Subsidiary Partnerships or on a liquidating
distribution of the Specified Assets by the respective Subsidiary Partnerships
to the partners therein."
G. (a) Seller and MIP hereby request, and Buyer hereby agrees, that
the portion of the Purchase Price allocable pursuant to Section 2.2. to the
California GP Interests (which portion shall be equal to the amount of the
capital contribution made by Seller therefor as set forth in Exhibit A hereto)
payable to MIP as consideration for MIP's Transfer thereof to Buyer shall be
paid by Buyer directly to Seller's account as designated in the wire transfer
instructions delivered to Buyer by Seller pursuant hereto and Seller hereby
agrees to promptly deliver such portion of the Purchase Price to MIP.
(b) For all purposes of Sections 2.3 and 2.4 of the Purchase
Agreement, all calculations made pursuant to said sections will be prepared on a
consolidated basis (i) prior to the Closing Date, treating the Specified Assets
and cash of the Corporate Partner and the Subsidiary Partnerships as if directly
owned by Seller, and as of and following the Closing Date, treating the
Specified Assets and cash of the Corporate Partner and the
4
<PAGE>
Subsidiary Partnerships as if directly owned by Buyer, and (ii) as of and
following the Closing Date, treating the FCC Partnership as if wholly owned by
Buyer and the FCC Assets as if directly wholly owned by Buyer, in each case
contemplated by this clause (ii) without regard to the interests therein of MLP
Acquisition and the Administrative General Partner.
(c) Notwithstanding anything in the Agreement to the contrary,
the Purchase Price shall be increased by an amount equal to all cash of the
Corporate Partner and the Subsidiary Partnerships owned by such entities at the
Closing. In this regard, (i) Section 2.3(b) is hereby amended to add the phrase
"and any cash of the Corporate Partner and the Subsidiary Partnerships owned by
such entities at the Closing shall be reflected as assets on the Closing Date
Balance Sheet" after the word "Sheet" appearing in the last line of said Section
2.3(b) and (ii) Section 2.4(a) is hereby amended to add the phrase "and any cash
of the Corporate Partner and the Subsidiary Partnerships owned by such entities
at the Closing shall be reflected as assets on the Estimated Balance Sheet"
after the word "Sheet" appearing in the last line of said Section 2.4(a).
H. Section 3.2 is hereby amended as follows:
a. The word "and" shall be deleted from the end of clause (r) and
a new clause (t) shall be added as follows: "(t) documentation evidencing the
Transfer to Buyer of all of the GP Interests (including, without limitation, the
California GP Interests), and stock certificates evidencing the Shares together
with stock transfer powers executed in blank";
b. A new clause "(u)" shall be added as follows: "(u) certified
copies of the resolutions of the Board of Directors of Corporate Partner in
connection with the matters contemplated hereby to be performed by it, a
certificate of legal existence, good standing and tax good standing of the
Corporate Partner issued as of a recent date by the Secretary of State of the
State of Delaware, certificates of good standing and tax good standing of each
jurisdiction in which Corporate Partner is qualified to transact business, and
incumbency and specimen signature certificates dated the Closing Date with
respect to the officers of Corporate Partner executing any agreement
contemplated hereby to be executed by it"; and
c. A new clause "(v)" shall be added as follows: "(v) official
evidence of legal existence and related matters of each Subsidiary Partnership
issued as of a recent date with respect to each respective jurisdiction of
formation of each Subsidiary Partnership; executed copies of the Partnership
Agreement of each Subsidiary Partnership and the Transfer Agreement relating to
the Transfer of Specified Assets to each Subsidiary Partnership and the Transfer
Agreement relating to the Transfer of the California GP
5
<PAGE>
Interests to MIP in each case certified by the President or Vice President of
General Partner on behalf of Seller as being a true, correct and complete copy
of the applicable agreement, and stating that each such agreement is in full
force and effect as at the Closing and that there are no other agreements or
arrangements relating to the Subsidiary Partnership and/or the Specified Assets
and/or the California GP Interests to which Seller, MIP, Corporate Partner or
any of the Subsidiary Partnerships are party or by which any of their assets are
bound that have not been previously disclosed to Buyer."
I. Section 3.3 is hereby amended as follows:
a. The word "and" shall be deleted from the end of clause (h),
clause (i) shall be renumbered as clause "(k)" and new clauses "(i)" and "(j)"
shall be added as follows:
"(i) certified copies of the resolutions of the Board
of Directors of the Administrative General Partner in connection
with the matters contemplated hereby to be performed by it, a
certificate of legal existence, good standing and tax good
standing of the Administrative General Partner issued as of a
recent date by the Secretary of State of the State of Delaware
and incumbency and specimen signature certificates dated the
Closing Date with respect to the officers of Administrative
General Partner executing any agreement contemplated hereby to be
executed by it."
"(j) official evidence of legal existence and related
matters of the FCC Partnership issued as of a recent date with
respect to the jurisdiction of formation of the FCC Partnership
and certificates of good standing and tax good standing of each
jurisdiction in which the FCC Partnership is qualified to
transact business and incumbency and specimen signature
certificates dated the Closing Date with respect to the officers
and/or partners of the FCC Partnership executing any agreement
contemplated hereby to be executed by it."
J. Section 4.2 is hereby amended and restated in its entirety to
provide as follows:
"4.2. SUBSIDIARIES AND INVESTMENTS. Except for Marketable
----------------------------
Securities, the German Licensee Shares, the GP Interests owned by
Seller as set forth in Schedule 4.36 hereto and the Shares,
Seller does not own, directly or indirectly, of record or
beneficially, any outstanding voting securities or other equity
interests in any corporation, partnership, joint venture or other
entity."
6
<PAGE>
K. The first sentence of paragraph (b) of Section 4.5 is hereby
amended and restated in its entirety to provide as follows: "Except (x) as set
forth in Schedule 4.5(b), (y) for the Transfer of the Specified Assets to the
Subsidiary Partnerships as set forth in Schedule 4.36 and (z) the subscription
for and additional contributions in respect of the Shares, since the October
Balance Sheet Date Seller has conducted the Business only in the ordinary
course."
L. For all intents and purposes of Sections 4.5(b), 4.13 and 4.19,
all references to the "Business" and/or the "Purchased Assets", shall, to the
extent applicable to the Specified Assets, also mean and include the Specified
Assets. In this regard, but not in limitation of the foregoing, the phrase
"and, in the case of the Specified Assets, the applicable Subsidiary
Partnership" shall be added after the word "Seller" (i) in the second sentence
of Section 4.5(b), (ii) in the second line of Section 4.13 and (iii) in each
place such word appears in Section 4.19.
M. The first sentence of paragraph (a) of Section 4.19 is hereby
amended to add the following clause after the parentheses in the sixth line
thereof: "and for matters related to the Transfer of the Specified Assets to
the Subsidiary Partnerships as set forth in Schedule 4.36 hereto and the
Transfer of the California GP Interests to MIP".
N. The first line of Section 4.25 is hereby amended to add the
following clause after the words "Schedule 4.25" therein: "and for matters
related to the Transfer of the Specified Assets to the Subsidiary Partnerships
as set forth in Schedule 4.36 hereto and the Transfer of the California GP
Interests to MIP".
O. Article IV of the Purchase Agreement is hereby amended by adding
the following representations and warranties:
a. "4.33. ORGANIZATION OF SUBSIDIARY PARTNERSHIPS, CORPORATE
--------------------------------------------------
PARTNER AND MIP. Each of the Subsidiary Partnerships is a partnership duly
- ---------------
formed by Seller and the Corporate Partner pursuant to the laws of the state in
which it is formed as set forth in Schedule 4.36 hereto and has full power and
authority to own or lease and to operate and use its properties and assets and
to carry on its business as now conducted. The Corporate Partner is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Corporate Partner is duly qualified to transact
business as a foreign corporation and is in good standing in each of the states
of California, New York and Washington. MIP is a limited partnership duly formed
pursuant to the laws of Delaware and has full power and authority to acquire,
own and Transfer the California GP Interests. MIP has never made retail sales in
the State of California and is not required to hold and does not hold a retail
seller's permit under Section 6006.5 of the California Sales and Use Tax Law."
7
<PAGE>
b. "4.34. SUBSIDIARY PARTNERSHIP INTERESTS AND SHARES. The
-------------------------------------------
Shares are duly authorized, validly issued and outstanding and fully paid and
non-assessable and are not subject to preemptive rights. The Corporate Partner
has the power and authority to own the GP Interests owned by it."
c. "4.35. NO PRIOR ACTIVITIES; NO SUBSIDIARIES. Neither any of
------------------------------------
the Subsidiary Partnerships nor the Corporate Partner has (a) incurred, nor will
it incur prior to the Closing, directly or indirectly, any liabilities or
obligations, and there are no lawsuits, claims, suits, audits, proceedings or,
to the knowledge of Seller, investigations pending or threatened, against any of
the Subsidiary Partnerships or the Corporate Partner, (b) any employees, (c)
engaged in any business activity or transaction, or (d) entered into any
agreement or arrangement with any Person, except, (x) in connecti on with its
------
organization and the performance of its obligations hereunder and the
consummation of the transactions contemplated hereby to be performed by it and
(y) in the case of clauses (c) and (d) of this Section 4.35, for ownership of
the Specified Assets owned, held, used or disposed of by such Subsidiary
Partnership as contemplated hereby (and in the case of the Corporate Partner,
ownership of its GP Interests in each of the Subsidiary Partnerships) and the
making available to Seller of such Specified Assets for use in the Business.
Neither any of the Subsidiary Partnerships nor the Corporate Partner owns,
directly or indirectly, of record or beneficially, any outstanding voting
securities or other equity interests in any corporation, partnership, joint
venture or other entity (other than in the case of the Corporate Partner, its GP
Interests in the Subsidiary Partnerships) or has Transferred any Specified
Assets to any other Person other than in the ordinary course of business."
d. "4.36. CAPITALIZATION OF THE SUBSIDIARY PARTNERSHIPS AND
-------------------------------------------------
CORPORATE PARTNER. The GP Interests constitute all of the outstanding equity
- -----------------
interests in the Subsidiary Partnerships and the Shares constitute all of the
outstanding equity interests of the Corporate Partner. There are no outstanding
options, warrants, preemptive rights or other rights convertible into equity
interests or to subscribe for equity interests in any of the Subsidiary
Partnerships or the Corporate Partner, or any agreements, commitments or
understandings with respect to the foregoing, other than as contemplated hereby.
Each of Seller and Corporate Partner owns the GP Interests owned by it as set
forth in Schedule 4.36, and Seller owns the Shares, free and clear of all
Encumbrances other than Permitted Encumbrances (provided that, for purposes of
this Section 4.36, Permitted Encumbrances shall not include any mechanics',
materialmen's and similar liens) or as otherwise set forth on Schedule 4.36
hereto. The Seller has transferred the Specified Assets to each of the
respective Subsidiary Partnerships and the Corporate Partner has made the cash
capital contribution in each case as set forth in
8
<PAGE>
Exhibit A hereto, and each of the Subsidiary Partnerships owns the Specified
Assets owned by it as set forth in Schedule 4.36 hereto, free and clear of all
Encumbrances except Permitted Encumbrances (provided that, for purposes of this
Section 4.36, Permitted Encumbrances shall not include any mechanics',
materialmen's and similar liens); in this regard, all parties who prior to the
Transfer of the Specified Assets to the Subsidiary Partnerships had any security
interest in respect of the Specified Assets have released said security interest
and have waived until the earlier of the Closing or a date which is not later
than 8 days after such Transfer any "Default" or "Potential Default" relating to
such Transfer of the Specified Assets arising under the loan and/or security
documentation (as each such term is defined therein) with respect to which such
security interest was created."
e. "4.37. AUTHORITY OF SELLER, CORPORATE PARTNER, MIP AND
-----------------------------------------------
SUBSIDIARY PARTNERSHIPS. The execution, delivery and performance by Seller,
- -----------------------
Corporate Partner, MIP and each Subsidiary Partnership of all agreements
relating to or in connection with (i) in the case of the Seller, MIP and/or the
Corporate Partner, its respective ownership of the GP Interests owned by it, or
in the case of MIP to be owned by it, as set forth in Schedule 4.36 hereto
including, without limitation, the Partnership Agreement of each Subsidiary
Partnership, and (ii) in the case of the Seller and each of the Subsidiary
Partnerships, the respective Transfer and ownership of the Specified Assets
owned by each Subsidiary Partnership as set forth in Schedule 4.36 hereto,
including, without limitation, the Transfer Agreement between Seller and each
Subsidiary Partnership relating to the Specified Assets owned by such Subsidiary
Partnership, and (iii) in the case of Seller and MIP, the Transfer to MIP of the
California GP Interests, including, without limitation, the GP Transfer
Agreement have been duly authorized and approved by all requisite corporate or
partner actions, as applicable. The Partnership Agreement of each Subsidiary
Partnership has been duly authorized, executed and delivered by each of Seller
and the Corporate Partner (and, in the case of Melody California Partnership, by
MIP effective as of August 29, 1992), the Transfer Agreement relating to the
Transfer of Specified Assets owned by each Subsidiary Partnership has been duly
authorized, executed and delivered by Seller and the applicable Subsidiary
Partnership, and the GP Transfer Agreement has been duly authorized, executed
and delivered by Seller and MIP, and each such Partnership Agreement, Transfer
Agreement and GP Transfer Agreement is in full force and effect, is the legal,
valid and binding obligation of Seller, of MIP, of Corporate Partner and each
Subsidiary Partnership, as applicable to the extent they are each parties
thereto, enforceable in accordance with its terms."
P. Except as otherwise set forth herein, each of the representations
and warranties set forth in Article IV of the Purchase Agreement in respect of
any of the Purchased Assets previously owned by Seller prior to the Transfer
thereof to the
9
<PAGE>
Subsidiary Partnerships as contemplated hereby and thereafter constituting the
Specified Assets shall apply to such Specified Assets after such Transfer as if
such Specified Assets continued to be Purchased Assets owned directly by the
Seller.
Q. Article V of the Purchase Agreement is hereby amended by adding
the following representations and warranties:
"5.9. ORGANIZATION AND OWNERSHIP OF FCC PARTNERSHIP. The
---------------------------------------------
FCC Partnership is a partnership duly formed by MLP Acquisition
and the Administrative General Partner under the laws of Delaware
and has full power and authority to own and lease and operate and
use the FCC Assets and to carry on its business as proposed to be
conducted. The FCC Partnership is duly qualified to transact
business in each of Washington, Oregon, Massachusetts and
Minnesota.
"5.10. NO PRIOR ACTIVITIES; NO SUBSIDIARIES. The FCC
------------------------------------
Partnership has not (a) incurred, nor will it incur prior to the
Closing Date, directly or indirectly, any liabilities or
obligations, (b) engaged in any business activity or transaction,
or (c) entered into any agreement or arrangement with any Person,
except, in any such case, in connection with its organization and
the performance of its obligations hereunder and the consummation
of the transactions contemplated hereby to be performed by it."
R. Article VI of the Purchase Agreement is hereby amended to add
thereto a new Section 6.11, to read in its entirety as follows:
"6.11 ACQUISITION, DISPOSITION AND USE OF SPECIFIED ASSETS.
----------------------------------------------------
(i) If at any time following the date hereof and prior to the
Closing Date Seller shall acquire any tangible personal property
of a nature comparable to a Specified Asset and which is located
in any of California, New York or Washington, and such
acquisition is otherwise permitted pursuant to the Purchase
Agreement, Seller may contribute such asset to such Subsidiary
Partnership as is located in the state in which such asset is
located, and Schedule 4.36 hereto shall be appropriately amended
to reflect the contribution of such asset and the adjustment of
Seller's and Corporate Partner's respective GP Interests in such
Subsidiary Partnerships.
(ii) If after the date hereof and prior to the Closing
Date any of the Subsidiary Partnerships disposes of any asset
owned by such Subsidiary Partnership, provided, that such
--------
disposition is otherwise permitted
10
<PAGE>
pursuant to the Purchase Agreement (for this purpose, treating
such asset as if such asset were then directly owned by Seller),
such Subsidiary Partnership may distribute the proceeds of such
disposition to Seller and the Corporate Partner in accordance
with their respective GP Interests in such Subsidiary Partnership
as reflected on Schedule 4.36 hereto. Any such asset so disposed
of shall no longer constitute a Specified Asset.
(iii) Seller shall cause the Corporate Partner and each
of the Subsidiary Partnerships to make their respective Specified
Assets available without charge to Seller for use in the Business
from the date hereof through and including the Closing Date and
shall execute such documentation as is reasonably satisfactory to
Buyer to evidence the foregoing. Seller has obtained insurance
coverage for the Subsidiary Partnerships, at Seller's expense, if
any, in form, coverage and substance meeting the standard
established by Section 4.23."
S. a. Clause (ii) of paragraph (a) of Section 6.4 is hereby amended
and restated in its entirety to provide as follows: "(ii) Seller shall not, nor
shall it attempt to, nor shall Seller cause or permit any of the Subsidiary
Partnerships to, sell, attempt to sell, agree to sell or Transfer, encumber, or
agree or attempt to encumber, any interest in the Business or the Purchased
Assets and/or the Specified Assets, except (x) in the ordinary course of
business, (y) as otherwise permitted pursuant hereto and (z) for the Transfer of
the Specified Assets to the Subsidiary Partnerships;".
b. Clause (ix) of Section 6.4 is hereby amended to add the
following clause after the word "Seller" in the third line thereof: ", other
than in connection with the Transfer of the Specified Assets in connection with
the capitalization of the Subsidiary Partnerships as contemplated hereby and the
Transfer of the California GP Interests to MIP".
T. Section 7.25 of the Agreement is hereby amended to add the
following phrase before the word "At" in the first line thereof: "Except for
arrangements expressly disclosed in writing to Buyer prior to the Closing and on
terms satisfactory to Buyer,".
U. Pursuant to that certain letter agreement dated March 11, 1992
among the Parties, as renewed pursuant to the Letter Agreement dated July 31,
1992 among the Parties (the "FCC Letter"), Seller and Buyer have arranged for
certain matters relating to the construction and operation of certain radio
station facilities ("Facilities") relating to the "Applications" (as defined in
the FCC Letter and as set forth in Exhibit B hereto). Notwithstanding the FCC
Letter, the parties hereto agree that paragraph 3 of the FCC Letter shall read
in its entirety as follows:
11
<PAGE>
"Upon completion of a Facility, Seller, Buyer and the FCC
Partnership shall (i) execute an FCC Application and all other
documents necessary to obtain the consent of the FCC to the
assignment to the FCC Partnership of the channel capacity under
the License relating to such Facility and (ii) execute a long
term lease for the channel capacity under the License and the
Facility relating to such License. Each such lease shall be in
form and substance reasonably satisfactory to Buyer and Seller
and shall provide for (a) rental payments of $1 per month from
the FCC Partnership to Seller, (b) the purchase by the FCC
Partnership of the License and Facility covered by such lease for
the purchase price of $1 at any time during the term of the lease
and in conformity with applicable law, and (c) the purchase by
Buyer of the License and Facility covered by such lease for the
purchase price of $1 upon the terms provided in such lease."
Capitalized terms used in this Section U. and not otherwise defined shall have
the meaning ascribed thereto in the FCC Letter.
V. A new Section 7.32 is hereby added to Article VII to read in its
entirety as follows:
"7.32 TRANSFER OF LIMITED PARTNERSHIP INTEREST IN MELODY
--------------------------------------------------
CALIFORNIA PARTNERSHIP. Not later than August 29, 1992, Seller
----------------------
shall distribute to MIP all of the California GP Interests,
pursuant to the terms of the Transfer Agreement relating thereto
set forth on Exhibit A hereto. At Closing, MIP shall Transfer to
Buyer all of such California GP Interests, free and clear of all
Encumbrances other than Permitted Encumbrances (provided that for
purposes of this Section 7.32, Permitted Encumbrances shall not
include any mechanics', materialmen's and similar liens)."
W. Except as otherwise set forth in this Amendment, each of the
covenants and agreements of Seller set forth in Articles VI and VII of the
Purchase Agreement shall apply to the Subsidiary Partnerships and Corporate
Partner to the extent applicable to the Specified Assets, and any such covenant
and agreement made in respect of any of the Purchased Assets previously owned by
Seller prior to the Transfer thereof to the Subsidiary Partnerships as
contemplated hereby and thereafter constituting the Specified Assets shall apply
to such Specified Assets as if such Specified Assets continued to be Purchased
Assets directly owned by Seller.
X. Section 8.11 of the Purchase Agreement is hereby amended to read
in its entirety as follows:
12
<PAGE>
"8.11 RESIGNATIONS AND RELEASES. Seller shall have executed and
-------------------------
delivered, and/or caused to be executed and delivered, to Buyer (i)
resignations of and releases of liability (for the benefit of Corporate
Partner and other parties specified in such release) from each of the
officers, directors and shareholders of Corporate Partner and (ii) releases
of liability (for the benefit of Corporate Partner, the Subsidiary
Partnerships and other parties specified in such release) from each of
Seller and MIP regarding their respective partnership interests in any of
the Subsidiary Partnerships."
Y. Section 10.1(a)(i) is hereby amended to add the phrase "4.33, the
second and third sentences of Section 4.36, 4.37" after the reference "4.3" in
the second line thereof and to add the reference "5.9" after the reference "5.2"
in the second line thereof.
Z. A new Schedule 4.36 is hereby added to the Purchase Agreement, to
read in its entirety as set forth in Exhibit A hereto. A new Schedule 7.29 is
hereby added to the Purchase Agreement, to read in its entirety as set forth in
Exhibit B hereto. The form of Management Option Plan set forth in Schedule 5.5
is hereby deleted and replaced in its entirety by Exhibit D hereto. The equity
commitments set forth in Schedule 5.5 contemplated by the first sentence of
Section 5.5 are hereby deleted and replaced in their entirety by the equity
commitments set forth as Exhibit E hereto. The commitment of Barclays Bank PLC
set forth in Schedule 5.5 contemplated by the second sentence of Section 5.5 is
hereby amended, supplemented, and modified by the terms of the commitment of
Barclay's Bank PLC attached as Exhibit F hereto, which Exhibit F is hereby added
to Schedule 5.5, and in this regard the number "$10,000,000" appearing in the
fourth line of Section 5.5 is hereby changed to "$7,500,000". Schedule 5.5 is
hereby further amended to add thereto (i) the Barclays Put/Call Option Agreement
and (ii) the Barclays Registration Rights Letter Agreement, in the respective
forms thereof attached as Exhibit G hereto. The Commitment Letter from Union
Bank of Switzerland ("UBS") set forth in Schedule 5.5 contemplated by the fourth
sentence of Section 5.5 is hereby amended, supplemented and modified by the
terms of the commitment of UBS set forth as Exhibit H hereto, which Exhibit H is
hereby added to Schedule 5.5, and in this regard the number "$40,000,000"
appearing in the fifteenth line of said Section 5.5 is hereby changed to
$33,500,000". The form of Amended Partnership Agreement attached as Exhibit E
to the Agreement is hereby deleted and replaced in its entirety by Exhibit I
hereto. The Parties hereby agree that the form of confidentiality agreement
agreed upon pursuant to Section 12.1(c) of the Purchase Agreement and Section
16.03 of the Amended Partnership Agreement shall be as set forth in Exhibit B to
the Amended Partnership Agreement. The form of Earn-Out Note attached
13
<PAGE>
as Exhibit A to the Purchase Agreement is hereby deleted and replaced in its
entirety by Exhibit J hereto.
AA. The Parties hereby agree to amend the definition of "Transfer
Event" in the Purchase Agreement to add the phrase: "(x) the Buyer to secure
any indebtedness of the holder of such partnership interest to the Buyer
incurred in connection with the purchase of such partnership interest and (y)"
after the word "to" in the nineteenth line of such definition.
BB. The Parties have further determined to extend the Termination Date
and to make certain other modifications and amendments to the Agreement as set
forth below:
1. The Termination Date is hereby extended to be, and hereby is
established as, September 4, 1992.
2. The Parties acknowledge that, notwithstanding Section 3.1, the
Closing Date is anticipated to be the earlier of September 4, 1992 or such other
date prior thereto as the Parties shall mutually agree, but that notwithstanding
anything to the contrary in the Agreement, the Parties intend for August 31,
1992 to be the date as of which calculations are to be made and measuring
periods to commence for purposes of calculating the Closing Payment and
adjustments thereto and the calculations to be made in respect of the Earn-Out
Payment (collectively, the "Economic Calculations"). In this regard, the
Parties hereby agree that each and every reference in Sections 2.3, 2.4 and 2.5
of the Agreement to the "Closing Date" and/or any defined term in said sections
referencing the phrase "Closing Date" as used in such term shall be interpreted
to reference August 31, 1992 (i.e., for purposes of the above referenced
----
sections "Closing Date" means "August 31, 1992"), provided, that the
modification described in this paragraph BB. 2. shall not apply to Section
2.5(d).
Notwithstanding the foregoing, interest, if any, on the
amounts determined pursuant to paragraph BB. 5. hereof (including the interest
components thereof) shall for purposes of Section 2.4 accrue from September 4,
1992.
3. Notwithstanding paragraph BB. 2 above, the Parties
acknowledge that the Economic Calculations shall in no way derogate from the
obligations of (i) Seller to deliver all Seller's right, title and interest in
and to the Purchased Assets as at the Closing Date and to retain all the
Excluded Liabilities as at the Closing Date and (ii) Buyer to purchase all
Seller's right, title and interest in and to the Purchased Assets as at the
Closing Date and to assume all the Assumed Liabilities as of the Closing Date.
In this regard, Seller agrees to promptly deliver to Buyer any proceeds received
by Seller under any insurance policy contemplated by Section 4.23 regarding any
event contemplated by Section 4.23 occurring during the "Holding Period" (as
defined below) with
14
<PAGE>
respect to the Purchased Assets other than proceeds received relating to
Excluded Liabilities.
4. (a) Notwithstanding anything to the contrary set forth
herein, at Closing Seller shall be entitled to retain as an Excluded Asset its
cash, cash equivalents, bank deposits (including deposited but uncleared funds)
and Marketable Securities (collectively, "Cash"), otherwise than as expressly
provided for in this Amendment in respect of the Subsidiary Partnerships and the
Corporate Partner, in an amount (the "August Base Amount") equal to Seller's
Cash as at the close of business on August 31, 1992 determined in accordance
with GAAP applying the same accounting principles, practices, methods and
adjustments as were used by Seller in the preparation of the October Balance
Sheet. At Closing, Seller, in consultation with the senior management of Seller,
shall prepare and deliver to Buyer a schedule setting forth Seller's estimate of
the August Base Amount, determined as aforesaid (the "Estimated August Base
Amount"), and Seller's estimate of Seller's Cash as at the close of business on
the day before the Closing Date (the "Estimated Closing Date Cash Amount").
(b) At the Closing (i) if the Estimated Closing Date Cash
Amount exceeds the Estimated August Base Amount, Buyer shall be entitled to
reduce the Closing Payment (as otherwise calculated pursuant to Section 2.4(b))
by the amount of the difference between the Estimated Closing Date Cash Amount
and the Estimated August Base Amount and (ii) if the Estimated Closing Date Cash
Amount is less than the Estimated August Base Amount, the Closing Payment (as
otherwise calculated pursuant to Section 2.4(b)) shall be increased by an amount
equal to the difference between the Estimated Closing Date Cash Amount and the
Estimated August Base Amount. The amount of any such difference is herein
referred to as the "Estimated Cash Adjustment Amount".
(c) Concurrently with the delivery of the Closing Date
Balance Sheet, Buyer shall prepare, and shall deliver to Seller, a schedule
setting forth Buyer's audited calculation of the August Base Amount and Cash as
at the close of business on the day before the Closing Date, determined in
accordance with GAAP applying the same accounting principles, practices, methods
and adjustments as were used by Seller in the preparation of the October Balance
Sheet (the "Closing Date Cash Amount") and setting forth the difference between
the August Base Amount and the Closing Date Cash Amount (the "Cash Adjustment
Amount"). If the Closing Payment as determined at the Closing using the
Estimated Cash Adjustment Amount exceeds the amount the Closing Payment would
have been had the Closing Payment been determined at Closing using the Cash
Adjustment Amount instead of the Estimated Cash Adjustment Amount, (i) Buyer
shall be entitled to further reduce the Closing Payment (as otherwise calculated
pursuant to Section 2.4) by the amount of such excess or (ii) Seller shall
promptly repay to Buyer the amount of such excess, as applicable. If the Closing
Payment
15
<PAGE>
as determined at the Closing using the Estimated Cash Adjustment Amount is less
than the amount the Closing Payment would have been had the Closing Payment been
determined at Closing using the Cash Adjustment Amount instead of the Estimated
Cash Adjustment Amount, the Closing Payment (as otherwise calculated pursuant to
Section 2.4) shall be increased by an amount equal to such difference in the
calculation of the Closing Payment. The amount of such change in the Closing
Payment as calculated in the circumstances contemplated by the two preceding
sentences is herein referred to as the "Final Cash Adjustment Amount".
5. (a) On the Closing Date, Seller, in consultation with the
senior management of Seller, shall prepare and deliver to Buyer a schedule
setting forth the amount of any deposit, draw made under the Seller Debt or
capital contribution (the "Cash Infusions") made by or to Seller in compliance
with the terms hereof after the close of business on August 31, 1992 and through
the end of the remaining portion of the Holding Period (and not included in the
August Base Amount), including, without limitation, the deposit made in respect
of the September 1, 1992 payroll payments (the "Payroll") of the Business, other
than any Cash Infusion made with respect to the payment contemplated by Section
7.4(c) and any Cash Infusion made in respect of satisfying, paying or
discharging any other Excluded Liability.
(b) At Closing, Buyer shall pay to Seller an amount equal to
the Cash Infusions minus any such portion of the Cash Infusions as shall have
-----
been repaid by Seller during the Holding Period (the "Adjusted Cash Infusion
Amount"). In addition, at Closing Buyer shall pay to Seller interest on the
Closing Payment, the August Base Amount and the Adjusted Cash Infusion Amount at
the rate of 6.75% per annum (based on a 360 day year) for the number of days
elapsed during the Holding Period (but excluding the last day of the Holding
Period).
(c) At the time of making the final payments in respect of
the Closing Payment adjustments pursuant to Section 2.4, Buyer shall pay to
Seller, or Seller shall pay to Buyer, as applicable, interest on the Final Cash
Adjustment Amount as calculated in the manner set forth in Section 2.4.
6. The Parties agree that, notwithstanding paragraphs BB. 2, 4
and 5 above, any disputes arising with respect to the calculations made pursuant
to said paragraphs shall be resolved by following as nearly as practicable the
dispute resolution procedures set forth in Section 2.3(e), (f) and (g).
7. Seller hereby covenants and agrees that, for the period from
and including August 31, 1992 through and including the Closing Date (the
"Holding Period"), in no event shall Seller, other than in consultation with
Buyer, make any business decision or enter into any transaction during the
Holding Period which may
16
<PAGE>
have a significant financial or operational effect on the Business. Without
limiting the foregoing, under no circumstances shall Seller make any payment or
distribution of cash or other current assets other than repayment of a Cash
Infusion (i) under or in respect of the Seller Debt Credit Agreement dated March
9, 1989 during the Holding Period, (ii) to any Seller Group Member or Affiliate
of Seller during the Holding Period and/or (iii) in respect of the items
contemplated by paragraph DD. below during the Holding Period.
8. (a) Buyer covenants and agrees that (i) it will not, under
any circumstances, without the prior written consent of Seller, in any way
access, withdraw, transfer or otherwise dispose of funds in the accounts
maintained by and/or in the name of Buyer (other than any account established in
connection with Buyer's financing of the purchase of the Purchased Assets at
Union Bank of Switzerland, New York Branch, including, without limitation, the
MLP Operating L.P. account at Bank of New York that was so established) (the
"Buyer Accounts") in respect of the operation of the Business during the Holding
Period and thereafter, other than to pay the Payroll and (ii) Buyer is operating
such Buyer Accounts in trust for the benefit of Seller during the Holding
Period, and Buyer acknowledges that Seller shall have beneficial ownership of
the Buyer Accounts until the Closing Date.
(b) Buyer covenants and agrees that if the Agreement expires
or terminates for any reason without the Closing having occurred, Buyer will
remit to Seller all amounts actually in the Buyer Accounts.
CC. If any sales, use or other similar Tax Returns for which Seller is
the Responsible Party under Section 1.7 would, but for the provisions of Section
1.7, have a due date for the filing thereof that is subsequent to the Closing
Date, then, notwithstanding the provisions of Section 1.7, Seller need not file
such Tax Returns on the Closing Date, but rather shall prepare and file such Tax
Returns by the due date provided under applicable law. In this regard, Buyer
shall cooperate with Seller in the preparation of such Tax Returns, and Seller
shall provide a copy of such Tax Returns to Buyer not later than 7 business days
before the due date for the filing thereof so that Buyer shall have a reasonable
opportunity to review and comment on them, provided, that such Tax Returns shall
--------
in all events be filed by the due date thereof. On or before the due date
thereof, Buyer shall remit to Seller the portion of the Taxes set forth in such
Tax Returns for which Buyer is responsible as provided in Section 1.7.
DD. Seller hereby represents and warrants that, following the Closing
and after giving effect to Section 7.25 and Seller's obligations thereunder,
Seller will have on hand unencumbered cash proceeds and/or other liquid assets
from the Closing Payment, from existing resources and/or from other sources in
an amount
17
<PAGE>
sufficient to pay or provide for the amount (in its good faith estimate) of the
fees and expenses of its professional advisers (including, without limitation,
legal, accounting and non-contingent financial adviser fees and expenses) and
other transaction costs incurred in connection with the transactions
contemplated hereby, plus $500,000.
3. Seller, Buyer and the FCC Partnership acknowledge and agree that, for
all tax, accounting and financial reporting purposes, each FCC Lease is
intended, and is considered by them, to constitute a sale by Seller to Buyer on
the Closing Date, of all the FCC Assets covered thereby, and will be so
reflected by them on their respective tax returns and financial reports.
Seller, Buyer and the FCC Partnership further agree that they will not take any
position for tax, accounting or financial reporting purposes that is
inconsistent with Buyer's ownership of such property from and after the Closing
Date.
4. Each of Seller, General Partner (on behalf of Seller and itself), MIP
and TFC has the partnership power and authority to execute, deliver and perform
this Amendment. The execution, delivery and performance of this Amendment by
each of Seller, General Partner (on behalf of Seller and itself), MIP and TFC
has been duly authorized and approved by all requisite corporate and partnership
action, as applicable. This Amendment has been duly authorized, executed and
delivered by each of Seller, General Partner (on behalf of Seller and itself),
MIP and TFC and is the legal, valid and binding obligation of Seller, General
Partner, MIP and TFC, enforceable in accordance with its terms.
5. Each of Buyer and the FCC Partnership has full power and authority to
execute, deliver and perform this Amendment. The execution, delivery and
performance of this Amendment by each of Buyer and the FCC Partnership have been
duly authorized and approved by all requisite partnership action. This
Amendment has been duly authorized, executed and delivered by each of Buyer and
the FCC Partnership and is the legal, valid and binding obligation of each of
Buyer and the FCC Partnership, enforceable in accordance with its terms.
6. The Parties agree that the FCC Partnership, notwithstanding its
execution of this Amendment, is not to be treated as a party to the Agreement
other than in connection with the matters contemplated by Sections 2.U. and 3
hereof. The Parties agree that MIP, notwithstanding its execution of this
Amendment, is not to be treated as a party to the Agreement other than in
connection with the matters contemplated by Sections 2.A. and 2.V. hereof
7. Except as specifically set forth herein, the Purchase Agreement shall
remain in full force and effect. It is agreed by the Parties that the Exhibits
hereto and the addition of new
18
<PAGE>
Schedules to the Agreement pursuant hereto do not constitute Disclosure pursuant
to Section 6.8 of the Agreement.
8. This Amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
9. On and after the date hereof, each reference in the Purchase Agreement
to "this Agreement", "the Purchase Agreement", "hereunder", "hereof", or words
of like import referring to the Purchase Agreement, and each reference in every
other Seller Ancillary Agreement or Buyer Ancillary Agreement to the "Purchase
Agreement", "thereunder", "thereof", or other words of like import referring to
the Purchase Agreement, shall mean the Purchase Agreement as amended by this
Amendment. For purposes of this Amendment, the representations and warranties
of Seller set forth in Section 2 hereof and the representations and warranties
of Buyer set forth in Section 2 hereof are not made prior to the date of this
Amendment.
10. This Amendment and the Exhibits and Schedules referred to herein and
the documents delivered pursuant hereto together with the Purchase Agreement
contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior agreements
or understandings between or among any of the parties hereto, including the
letter of intent (the "Letter of Intent") dated December 20, 1991 among Seller,
TFC and CCI, as amended, the Confidentiality Agreement (which shall survive any
termination of this Agreement) and any disclosure made or omitted pursuant to
the Private and Confidential Muzak Limited Partnership Review Document dated
July 1991 delivered to Buyer with respect to the Business, as to which no
representation or warranty is made, other than (i) that certain letter agreement
dated July 31, 1992 among the Parties with respect to the March 11, 1992 letter
agreement among the Parties, as modified by Section 2.U. hereof, and (ii)
Section 7.31 of the Purchase Agreement added pursuant to Section 2.H. of
Amendment No. 2 to the Purchase Agreement (in this regard, Buyer hereby
acknowledges receipt of the letters from each of Arthur Andersen & Co. and
Sidley & Austin referred to in said Section 7.31, and confirms that such letters
are to the effect required of them by said Section 7.31 and that Buyer shall not
require the delivery of any further letters (other than the opinions
contemplated by Article VIII hereof, which opinions shall not be required to
address state sales tax matters) as a condition to proceeding with the
transactions described in such letters). This Amendment shall not be amended,
modified or supplemented except by a written instrument signed by an authorized
representative of each of the parties hereto.
19
<PAGE>
11. This Amendment shall be governed by and construed in accordance with
the internal laws (as opposed to the conflicts of law provisions) of the State
of New York.
12. Any term or provision hereof may be waived, or the time for its
performance may be extended, by the party or parties entitled to the benefit
thereof. Any such waiver shall be validly and sufficiently authorized for the
purposes hereof if, as to any party, it is authorized in writing by an
authorized representative of such party. The failure of any party hereto to
enforce at any time any provision hereof shall not be construed to be a waiver
of such provision, nor in any way to affect the validity hereof or any part
hereof or the right of any party thereafter to enforce each and every such
provision. No waiver of any breach hereof shall be held to constitute a waiver
of any other or subsequent breach.
20
<PAGE>
Annex X to Amendment No. 3 to
-----------------------------
Asset Purchase Agreement
------------------------
AX-1. The statement of assets and liabilities of Seller attached to this
Annex X shall be the "Estimated Balance Sheet" for all purposes of the
Agreement, notwithstanding the delivery of any other such statement for such
purpose.
AX-2. Notwithstanding anything in the Agreement to the contrary:
(a) the allowance for bad debts on the Closing Date Balance Sheet
shall equal the lesser of (i) $764,500 and (ii) 8.45% of the accounts receivable
on the Closing Date Balance Sheet, but on the Closing Date Balance Sheet there
shall be no variation from the principles, practices, methods and adjustments
relating to such accounts receivable required by the Agreement, other than as
aforesaid;
(b) the $32,500 adjustment in respect of the Johnson Electronics
(drive-through) inventory reflected on the Estimated Balance Sheet shall be
correspondingly reflected on the Closing Date Balance Sheet, but no other
adjustment in respect of such inventory (or any sale thereof) shall be reflected
on the Closing Date Balance Sheet or otherwise in respect of the Purchase Price;
(c) the $115,000 adjustment in respect of the payroll tax accrual
reflected on the Estimated Balance Sheet shall be correspondingly reflected on
the Closing Date Balance Sheet, and there shall be no variation on the Closing
Date Balance Sheet from the principles, practices, methods and adjustments
relating to such accrual (i.e., normal recognition on a straight-line basis
----
corresponding to the recognition of salary expense); and
(d) the Closing Date Balance Sheet shall reflect the following items
consistently with the reflection thereof on the Estimated Balance Sheet: (i)
prepaid insurance reflected on the Estimated Balance Sheet as $200,000
(estimated) of prepaid expense, (ii) Seller's cash actually used before August
31, 1992 to fund Buyer's operating accounts reflected on the Estimated Balance
Sheet as an asset and (iii) petty cash retained by Buyer reflected on the
Estimated Balance Sheet in the amount of $15,000.
AX-3. It is contemplated that (a) certain ________ otherwise payable by
Seller to certain of its employees ______________________________ Management
Investment Plan shall be paid through ______________________ amount of the
Closing Payment actually paid to ________________________ instead of being paid
to Seller, such amounts _____________________ for the benefit of such employees
via (i) cont_____ _________________
x-1
<PAGE>
capital of Buyer in consideration of the issuance of partnership interests in
Buyer to such employees and/or payments to such employees and (ii) withholding
the balance thereof in compliance with tax requirements) (such reduction shall
be effected for convenience only and not as a reduction of the Purchase Price,
and Seller's constructive receipt of the aggregate amount of such reduction
shall be treated for all purposes, as between Buyer and Seller, as Seller's
actual receipt thereof) and (b) to the extent agreed to by Buyer and Seller
before the Closing Date, Buyer shall pay certain prorated annual bonuses to
certain current employees of Seller if such bonuses are paid after August 31,
1992 (in which case such payment shall be treated as a repayment of a Cash
Infusion to the extent of such payment if the obligation to make such payment is
not reflected as a liability on the Closing Date Balance Sheet). In either case
(a) or (b), Buyer acknowledges that it shall have, or shall cause its agent to
have, responsibility for withholding and paying over such employees' taxes (but
not the employer's portion thereof, it being understood that $308.24 of
employer's portion will be paid over by Buyer in respect of one employee as a
reduction to the Purchase Price) in respect of such amounts, as well as related
reporting obligations. Seller shall cooperate with Buyer in respect of the
foregoing.
x-2
<PAGE>
Exhibit 10.2
<PAGE>
ASSET PURCHASE AND CONTRIBUTION AGREEMENT
dated as of November 24, 1993
among
COMCAST CORPORATION
COMCAST SOUND COMMUNICATIONS, INC. (a Delaware corporation)
COMCAST SOUND COMMUNICATIONS, INC. (a California corporation)
COMCAST SOUND COMMUNICATIONS, INC. (a Colorado corporation)
COMCAST SOUND COMMUNICATIONS, INC. (a Connecticut corporation)
COMCAST SOUND COMMUNICATIONS, INC. (a Florida corporation)
COMCAST SOUND COMMUNICATIONS, INC. (a Texas corporation)
COMCAST SOUND COMMUNICATIONS, INC. (a Michigan corporation)
COMCAST SOUND COMMUNICATIONS, INC. (a New York corporation)
COMCAST SOUND COMMUNICATIONS, INC. (a Pennsylvania corporation)
COMCAST SOUND COMMUNICATIONS, INC. (an Illinois corporation)
COMCAST SOUND COMMUNICATIONS, INC. (an Indiana corporation)
COMCAST SOUND MANAGEMENT, INC.
COMCAST SOUND COMMUNICATIONS
COMCAST REAL ESTATE HOLDINGS, INC.
and
MUZAK LIMITED PARTNERSHIP
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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ARTICLE I
<S> <C> <C>
PURCHASE AND SALE; CONTRIBUTION............................................ 2
1.1. Assets.......................................................... 2
1.2. Excluded Assets................................................. 4
1.3. Assumed Liabilities............................................. 5
1.4. Excluded Liabilities............................................ 6
1.5. [Intentionally Omitted]......................................... 7
1.6. Part Sale/Part Contribution; Conveyance and
Transfer........................................................ 7
1.7. Sales, Transfer and Related Taxes and Charges................... 7
1.8. Proration....................................................... 8
ARTICLE II
CONSIDERATION.............................................................. 8
2.1. Consideration................................................... 8
2.2. Allocation of Cash Consideration................................ 9
2.3. Cash Consideration Adjustment................................... 9
2.4. Calculation of Closing Payment and Payment of
Cash Consideration.............................................. 11
2.5. Preparation of Estimated and Closing Date
Balance Sheets.................................................. 12
ARTICLE III
CLOSING.................................................................... 13
3.1. Closing Date.................................................... 13
3.2. Comcast's and Transferors' Closing Deliveries................... 13
3.3. Buyer's Closing Deliveries...................................... 15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
COMCAST AND THE TRANSFERORS................................................ 16
4.1. Organization of the Transferors and Comcast..................... 16
4.2. Subsidiaries, Investments and Capitalization.................... 16
4.3. Authority of the Transferors and Comcast; Non-
Contravention................................................... 16
4.4. Financial Statements............................................ 18
4.5. Absence of Changes.............................................. 19
4.6. [Intentionally Omitted]......................................... 21
4.7. Taxes........................................................... 21
4.8. Condition of Assets; Ownership of Assets;
Business Activity............................................... 22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
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4.9. Governmental Permits............................................ 22
4.10. Real Property................................................... 23
4.11. Real Property Leases............................................ 24
4.12. Condemnation.................................................... 24
4.13. Personal Property; Sufficiency of Assets........................ 24
4.14. Personal Property Leases........................................ 25
4.15. Intellectual Property........................................... 25
4.16. Accounts Receivable............................................. 26
4.17. Environmental Matters........................................... 26
4.18. Employees and Related Agreements; ERISA......................... 27
4.19. Contracts....................................................... 30
4.20. [Intentionally Omitted]......................................... 31
4.21. Status of Contracts............................................. 31
4.22. No Violation, Litigation or Regulatory Action................... 32
4.23. Insurance....................................................... 32
4.24. [Intentionally Omitted]......................................... 32
4.25. Transactions with Affiliates.................................... 32
4.26. [Intentionally Omitted]......................................... 33
4.27. Personnel....................................................... 33
4.28. Customers and Suppliers......................................... 33
4.29. [Intentionally Omitted]......................................... 33
4.30. SCA Agreements.................................................. 33
4.31. No Finder....................................................... 34
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER.................................... 34
5.1. Organization of Buyer........................................... 34
5.2. Authority of Buyer; Non-Contravention........................... 34
5.3. Partnership Interest............................................ 36
5.4. Financing....................................................... 36
5.5. Financial Statements............................................ 36
5.6. No Finder....................................................... 36
ARTICLE VI
ACTION PRIOR TO THE CLOSING DATE........................................... 37
6.1. Investigation by the Parties.................................... 37
6.2. Notices......................................................... 39
6.3. Other Action; Consents of Third Parties;
Governmental Approvals.......................................... 39
6.4. Conduct of the Business Prior to the Closing.................... 39
6.5. Antitrust Compliance, etc....................................... 41
6.6. SCA Lessors..................................................... 42
6.7. Exon-Florio..................................................... 42
6.8. Transferors' Disclosure......................................... 42
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE VII
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ADDITIONAL COVENANTS OF THE PARTIES........................................ 43
7.1. Covenant Not to Compete......................................... 43
7.2. Expenses........................................................ 43
7.3. Publicity....................................................... 43
7.4. [Intentionally Omitted]......................................... 44
7.5. W-2 Matters..................................................... 44
7.6. Post-Closing Remittances........................................ 44
7.7. Access to Records After Closing................................. 44
7.8. Cooperation in Litigation and Taxes............................. 45
7.9. FIRPTA.......................................................... 45
7.10. Intellectual Property Assignments............................... 46
7.11. Confidentiality................................................. 46
7.12. [Intentionally Omitted]......................................... 46
7.13. Further Assurances.............................................. 46
7.14. Right of Endorsement; Power of Attorney......................... 46
7.15. Bulk Sales...................................................... 47
7.16. [Intentionally Omitted]......................................... 47
7.17. [Intentionally Omitted]......................................... 47
7.18. Amended Partnership Agreement................................... 47
7.19. Non-Solicitation................................................ 47
7.20. [Intentionally Omitted]......................................... 48
7.21. No Contest...................................................... 48
7.22. Subordination Agreement......................................... 48
7.23. Muzak License Agreements........................................ 48
7.24. Tradenames License.............................................. 48
7.25. Transition...................................................... 49
7.26. Employee Benefits............................................... 50
7.27. Property Liens.................................................. 50
7.28. Discharge of Certain Encumbrances............................... 51
7.29. Reorganization.................................................. 51
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER............................... 52
8.1. No Misrepresentations or Breach of Covenants.................... 52
8.2. No Material Adverse Change...................................... 52
8.3. Authorizing Action.............................................. 53
8.4. No Governmental Proceeding or Litigation........................ 53
8.5. No Injunction................................................... 53
8.6. Necessary Governmental Approvals................................ 53
8.7. Release of Encumbrances......................................... 53
8.8. Consents........................................................ 53
8.9. Deliveries...................................................... 53
8.10. Financing....................................................... 54
8.11. Certificates.................................................... 54
8.12. Opinion of Counsel.............................................. 54
8.13. Subordination Agreement......................................... 54
</TABLE>
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8.14. Estoppel Certificates........................................... 54
8.15. Title Insurance................................................. 54
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS
OF COMCAST AND THE TRANSFERORS........................................... 55
9.1. No Misrepresentation or Breach of Covenants..................... 55
9.2. Authorizing Action.............................................. 55
9.3. No Governmental Proceeding or Litigation........................ 55
9.4. No Injunction................................................... 55
9.5. Deliveries...................................................... 55
9.6. Necessary Governmental Approvals................................ 56
9.7. Certificates.................................................... 56
9.8. Opinion of Counsel.............................................. 56
9.9. Terms of Debt Financing......................................... 56
ARTICLE X
INDEMNIFICATION............................................................ 56
10.1. Survival of Indemnification..................................... 56
10.2. Indemnification by Comcast and the Transferors.................. 57
10.3. Indemnification by Buyer........................................ 58
10.4. Limitation on Amount of Indemnification......................... 58
10.5. Notice of Claims................................................ 59
10.6. Third Party Claims.............................................. 59
10.7. Recovery of Certain Damages..................................... 59
10.8. Certain Adjustments............................................. 60
10.9. Exclusive Remedy................................................ 60
10.10 Mitigation...................................................... 60
ARTICLE XI
TERMINATION................................................................ 60
11.1. Termination..................................................... 60
11.2. Effect of Termination........................................... 61
ARTICLE XII
GENERAL PROVISIONS......................................................... 61
12.1. Successors and Assigns, Parties, etc............................ 61
12.2. Entire Agreement; Amendments.................................... 61
12.3. Waivers......................................................... 62
12.4. Notices......................................................... 62
12.5. Partial Invalidity.............................................. 63
12.6. Execution in Counterparts....................................... 63
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12.7. Governing Law................................................... 63
12.8. Exclusivity..................................................... 63
12.9. Consent to Jurisdiction......................................... 63
13.1. Definitions..................................................... 64
13.2. Interpretation.................................................. 73
</TABLE>
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EXHIBITS
Exhibit A Form of Non-Competition Agreement
Exhibit B Form of Second Amended and Restated
Partnership Agreement
Exhibit C Form of Opinion of Counsel for
Transferors
Exhibit D Form of Opinion of Counsel for
Buyer
Exhibit E Form of Assumption Agreement
Exhibit F Form of Bill of Sale
Exhibit G Form of Assignment
Exhibit H March Balance Sheet
Exhibit I Form of Philadelphia Sublease
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<PAGE>
ASSET PURCHASE AND CONTRIBUTION AGREEMENT ("Agreement") dated as of
November 24, 1993, among Comcast Corporation, a Pennsylvania corporation
("Comcast"), Comcast Sound Communications, Inc., a Colorado corporation, and
Comcast Sound Communications, an Indiana partnership (the "Partnership"), with
respect to the Assets to be contributed by such partnership to Buyer (each a
"Contributing Party" and together the "Contributing Parties"), Comcast Sound
Communications, Inc., a Delaware corporation, Comcast Sound Communications,
Inc., a California corporation, Comcast Sound Communications, Inc., a Colorado
corporation, Comcast Sound Communications, Inc., a Connecticut corporation,
Comcast Sound Communications, Inc., a Florida corporation, Comcast Sound
Communications, Inc., a Texas corporation, Comcast Sound Communications, Inc., a
Michigan corporation, Comcast Sound Communications, Inc., a New York
corporation, Comcast Sound Communications, Inc., a Pennsylvania corporation,
Comcast Sound Communications, Inc., an Illinois corporation, Comcast Sound
Communications, Inc., an Indiana corporation, Comcast Sound Management, Inc., a
Pennsylvania corporation, Comcast Sound Communications, an Indiana partnership,
with respect to the Assets to be sold by such partnership to Buyer, and Comcast
Real Estate Holdings, Inc. ("CREH"), a Delaware corporation (each a "Selling
Party" and collectively the "Selling Parties"; the Contributing Parties and the
Selling Parties are hereinafter referred to collectively as the "Transferors"
and each individually as a "Transferor"), and Muzak Limited Partnership, a
Delaware limited partnership ("Buyer").
WHEREAS, the Transferors are engaged in the business of selling,
distributing, installing and maintaining subscription-based business music
services, music video services, data communications services, electronic
publication and information distribution services, video communications
services, in-store advertising and promotion services, telephone, commercial
sound and closed-circuit television equipment and related services
(collectively, the "Business"), it being understood that the Business shall not
include similar activities conducted by Affiliates of the Transferors but not by
the Transferors; and
WHEREAS, the Transferors desire to Transfer to Buyer, and Buyer
desires to acquire from the Transferors, on a going concern basis, the non-cash
assets and properties of the Transferors, and Buyer is willing to assume certain
liabilities in connection therewith, all on the terms and subject to the
conditions set forth herein; and
WHEREAS, Buyer desires to purchase certain of such assets from the
Selling Parties for cash and to acquire the balance of such assets from the
Contributing Parties as a capital contribution to Buyer, and the Selling Parties
desire to sell certain of such assets to Buyer and the Contributing Parties
desire to contribute the balance of such assets to Buyer and to be admitted to
Buyer as a limited partner holding a partnership
<PAGE>
interest in Buyer, all on the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, Comcast, the Transferors and Buyer hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE; CONTRIBUTION
-------------------------------
1.1. ASSETS. Upon the terms and subject to the conditions of this
------
Agreement, at the Closing the Transferors shall Transfer to Buyer, and Buyer
shall acquire from the Transferors, by purchase from the Selling Parties and by
contribution from the Contributing Parties, on a going concern basis, free and
clear of all Encumbrances (except for Permitted Encumbrances), all of the
Transferors' rights, title and interest in and to all of their respective
assets, properties, interests, contracts and claims of every kind and
description, wherever located, owned, used or held, real, personal or mixed,
tangible or intangible, with such changes, deletions or additions thereto as may
occur from the date of this Agreement to the Closing and consistent with the
terms and conditions of this Agreement, including but not limited to the
Transferors' rights, title and interest in and to the following, but in all
cases excluding any Excluded Assets ("Assets"):
(i) all petty cash, accounts and notes receivable and other
receivables;
(ii) all raw materials, supplies, work-in-process, finished goods,
goods on consignment and other inventory and materials;
(iii) all Governmental Permits, including without limitation the
Governmental Permits listed in Schedule 4.9(b);
(iv) all real property (including all buildings, improvements and
structures located thereon and all appurtenances thereto), including,
without limitation, the Properties, and real property interests (including
without limitation all claims and rights of every kind related to real
property leases, options, contract rights, rights of way and easements),
including without limitation the properties and interests identified in
Schedule 4.11;
(v) all machinery, equipment, vehicles, furniture, leasehold
improvements and fixtures and other fixed assets and personal property,
including without limitation the
2
<PAGE>
fixed assets and personal property listed or referred to in Schedule 4.13;
(vi) all intellectual property rights ("Proprietary Rights"),
including without limitation: (a) all United States and foreign patents and
patent applications, all United States and foreign copyrights and any
renewals, extensions and continuations thereof, United States, state, and
foreign trade names, trademarks and service marks, applications for
registrations of trademarks and service marks and trademark and service
mark registrations, as well as all registered, assumed or fictitious names
under which the Transferors are conducting the Business or have conducted
the Business ("Intellectual Property Rights"); (b) all software
("Software"), including without limitation source and object codes,
software programs and all documentation and materials relating thereto,
whether patentable and/or copyrightable or not; (c) all processes,
concepts, discoveries, know-how, improvements or ideas ("Inventions"),
whether patentable or not; (d) all useful information relating to
Inventions and/or Intellectual Property Rights ("Technical Information"),
including technology, engineering drawings, reports, design information,
trade secrets, practices, laboratory notebooks, specifications, test
procedures and maintenance manuals; (e) all patent, trademark and/or
copyright licenses and/or other licenses to use Intellectual Property
Rights, and/or Software and/or Inventions and/or Technical Information of
others ("Proprietary Rights Licenses"); and (f) the Proprietary Rights
listed in Schedule 4.15;
(vii) the Business as a going concern;
(viii) all phonograph record albums, phonograph records, compact
disks, master tapes and customer tapes;
(ix) all recordings and tape libraries;
(x) all claims and rights of every kind arising out of or related
to contracts, agreements, understandings, arrangements or commitments of
any kind, in all cases whether written or oral (collectively, the
"Contracts"), including without limitation joint venture agreements,
partnership agreements, leases (including real and personal property
leases), and licenses that allow the Transferors to operate the Business,
including without limitation all Contracts listed or described in Schedules
4.11, 4.14, 4.19(a) or 4.19(b);
(xi) all mailing lists, customer lists, subscriber lists and
processes, including related procedures, files and manuals and
documentation related thereto;
3
<PAGE>
(xii) all rights, claims and causes of action against third parties
arising under warranties from vendors and other third parties in connection
with the Assets;
(xiii) all books and records (including all data and other
information stored on disks, tapes or other media);
(xiv) all prepaid charges, sums and fees, and all security and
similar deposits, in each case paid by or on behalf of the Transferors in
connection with Contracts, Proprietary Rights, Governmental Permits and
other rights Transferred to Buyer pursuant hereto;
(xv) all letters of credit with respect to which a Transferor is a
beneficiary;
(xvi) all confidentiality agreements covering confidential
information concerning the Business, and all non-compete or similar
agreements restricting activities competitive with those of the Business,
in favor of Comcast or the Transferors;
(xvii) all assets reflected on the Closing Date Balance Sheet; and
(xviii) all other properties and assets owned or held by the
Transferors, whether or not of a type falling within any of the categories
of assets or properties described in Section 1.1 (i)-(xvii).
1.2. EXCLUDED ASSETS. "Excluded Assets" means:
---------------
(i) all cash (except petty cash), cash equivalents, bank deposits
and marketable securities;
(ii) the tradenames "Comcast", "Comcare", "Comcast Sound", "Comcast
Sound Communications", "Comcast Financial Products" or any related or similar
trade names, trademarks, service marks or logos containing, or referring to or
based on such tradenames;
(iii) all contracts and policies of insurance and all claims and
rights thereunder;
(iv) all notes and accounts receivable of, and other evidence of
indebtedness to and rights to receive payment of, the Transferors owing to the
Transferors from any of their Affiliates (other than from any such Affiliate in
its capacity as a subscriber or similar customer of the Business) not included
on the March Balance Sheet;
4
<PAGE>
(v) all refunds, and rights to receive any refund, of any Tax paid
by the Transferors or their Affiliates for periods prior to the Closing Date;
(vi) all right, title and interest in and to CREH's assets,
properties, interests, contracts and claims other than the Irving Property;
(vii) all minute books and other corporate books and tax returns of
the Transferors and their Affiliates;
(viii) all claims and rights of every kind arising out of or related
to the Contracts, or any other contractual or other rights, if the liabilities
and obligations arising or accruing thereunder are not to be assumed by Buyer
pursuant hereto;
(ix) all capital stock of the Transferors which are corporations
and all partnership interests of the Transferors which are partnerships; and
(x) Contracts set forth in Schedule 4.25, Schedule 4.18(a), (g),
(h), (j), (l) and (m) and the Contract and Promissory Note set forth in item 4
of Schedule 4.5(b).
1.3. ASSUMED LIABILITIES. Upon the terms and subject to the
-------------------
conditions of this Agreement, upon the Transfer of the Assets to be Transferred
at the Closing, Buyer shall assume and agree to pay, perform and discharge only
the following liabilities and obligations of the Transferors (the "Assumed
Liabilities"):
(i) liabilities and obligations arising or accruing under the
Contracts or with respect to the Assets or the Business of the Transferors
(other than (x) liabilities arising out of the failure of the Transferors
to obtain consents or approvals of third parties (including Governmental
Bodies) to the Transfer of such Contracts or other Assets to Buyer, (y)
liabilities and obligations under Contracts that should have been listed on
Schedules 4.11, 4.14, 4.19(a) or 4.19(b), but were not listed (except to
the extent that Buyer shall knowingly elect to accept performance
thereunder by any counterparty thereto, such acceptance to be deemed
effective as of the Closing Date) and (z) liabilities and obligations with
respect to Excluded Assets) with respect to events occurring or the time
period following the Closing Date; and
(ii) liabilities and obligations of the Transferors (other than
CREH) as of the Closing Date reflected on the Closing Date Balance Sheet
within the categories in the column entitled "Adjusted as of March 31,
1993" on the March
5
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Balance Sheet, including those liabilities to be accrued pursuant to
Section 2.5;
1.4. EXCLUDED LIABILITIES. Any liabilities and obligations, known
--------------------
and unknown, liquidated or unliquidated, contingent or fixed, of Comcast or the
Transferors which are not among the Assumed Liabilities (collectively, the
"Excluded Liabilities"), whether or not disclosed in this Agreement or on any
Schedule or Exhibit hereto, shall remain the liabilities and obligations of
Comcast or the Transferors, as the case may be, including but not limited to the
following liabilities and obligations:
(i) liabilities and obligations to pay any Taxes which are due or
shall become due: (x) as a result of the operations of the Business or the
ownership of the Assets through and including the Closing Date (other than
those Taxes to be paid by Buyer under Section 1.8 and those Taxes accrued
on the Closing Date Balance Sheet in the category referred to as "Accrued
Payroll & Taxes" on the March Balance Sheet), (y) by reason of the
Transfers made at Closing, including, without limitation, Taxes payable by
the Transferors pursuant to Section 1.7 (but without derogating from
Buyer's obligations under Section 1.7), or (z) by reason of the
consummation of any of the transactions contemplated by Section 7.29;
(ii) liabilities and obligations arising under Environmental Laws
as in effect prior to the Closing Date with respect to events occurring
prior to or on the Closing Date;
(iii) liabilities and obligations relating to employees employed in
the Business arising out of events occurring prior to or on the Closing
Date, including without limitation severance pay, or arising out of Buyer's
not employing any employee of any of the Transferors, except and to the
extent accrued on the Closing Date Balance Sheet as provided in Section
2.5;
(iv) liabilities and obligations arising out of any employee
benefit plan within the meaning of Section 3(3) of ERISA except and to the
extent accrued on the Closing Date Balance Sheet as provided in Section
2.5;
(v) liabilities and obligations arising out of the violation prior
to or on the Closing Date of any Governmental Rule; and
(vi) liabilities and obligations under the Contracts set forth in
Schedules 4.18(h) and 4.25 and under the
6
<PAGE>
Contract and Promissory Note set forth in item 4 of Schedule 4.5(b).
1.5. [INTENTIONALLY OMITTED].
---------------------
1.6. PART SALE/PART CONTRIBUTION; CONVEYANCE AND TRANSFER. The
----------------------------------------------------
Transferors and the Buyer intend and agree that the Transfer of the Assets shall
constitute (i) a sale of Assets held by the Selling Parties to Buyer in exchange
for the Cash Consideration, and (ii) the contribution of Assets held by the
Contributing Parties to the capital of Buyer in exchange for the issuance to the
Contributing Parties of the Partnership Interest. The Transferors and Buyer
agree that the Transfer of the Assets will be effected by, and Comcast and the
Transferors shall, on the Closing Date, deliver, such bills of sale, deeds,
endorsements, assignments and other instruments of transfer, in form reasonably
satisfactory to Buyer and its counsel, as Buyer may reasonably request or as may
be otherwise reasonably necessary to vest in Buyer all right, title and interest
of the Transferors in, to or under all of the Assets, free and clear of all
Encumbrances other than Permitted Encumbrances.
1.7. SALES, TRANSFER AND RELATED TAXES AND CHARGES. Except as
---------------------------------------------
provided in Section 7.29 and except for any such Taxes or portion thereof which
would not have been payable but for the consummation of any of the transactions
contemplated by Section 7.29, which additional Taxes or portions thereof shall
be borne entirely by Comcast, the Transferors, on the one hand, and Buyer, on
the other hand, shall each be responsible for one-half (1/2) of the aggregate of
all sales, use, transfer, recordation, or other similar Taxes, together with
notarial fees or other charges, imposed on the Transfer of the Assets. At the
Closing (i) whichever party is primarily responsible for such Taxes (or other
charges) under applicable law (the "Responsible Party") shall prepare and file
the appropriate Tax Returns (or other filings) relating to such Taxes (or other
charges) based on the Buyer's schedule of the tentative allocations prepared
pursuant to Section 2.2, shall deliver copies of such Tax Returns (or other
filings) to the other party, and shall notify in writing the other party (the
"Notice Party") of its payment obligations pursuant to this Section 1.7, and
(ii) the Notice Party shall pay or reimburse the Responsible Party for its share
of any Taxes (or other charges) due with respect to such Tax Returns (or other
filings). In the event the amount of such Taxes (or other charges) increases as
a result of an adjustment to the Cash Consideration hereunder, or as a result of
a determination of a Governmental Body, then (i) the Responsible Party shall
prepare and timely file the appropriate Tax Returns (or other filings) relating
to such additional Taxes (or other charges), shall deliver copies of such Tax
Returns to the Notice Party and shall notify in writing the Notice Party of its
payment obligations pursuant to this Section 1.7, and (ii) the Notice Party
shall
7
<PAGE>
timely pay or reimburse the Responsible Party for its share of any such
additional Taxes (or other charges). Notwithstanding the foregoing, if, under
the laws of a particular jurisdiction, the Responsible Party is not able to
transfer to the Notice Party the burden of its share of any such Taxes (or other
charges), then the Notice Party shall pay a greater share of any such Taxes (or
other charges) payable to a jurisdiction that permits (or requires) such Taxes
(or other charges) to be borne by the Notice Party or shall take such other
actions as may be reasonably requested by the Responsible Party to effectuate
the equal division of the costs of any such Taxes (or other charges) in
accordance with the first sentence of this Section 1.7. The Transferors, on the
one hand, and the Buyer, on the other hand, also agree that each shall share
one-half of all refunds of any such Taxes (or other charges). With respect to
any such Taxes requiring filing of questionnaires, affidavits or other
information or documents in addition to or in lieu of any Tax Return (including
without limitation Article 31-B of the New York Tax Law with respect to
assignment of leases of real property), the Transferors and Buyer agree to
comply in a timely manner with all requirements for such filings prior to and
subsequent to the Closing.
1.8. PRORATION. Ad valorem, property and other similar Taxes due
---------
with respect to the Assets for any taxable year (or period) beginning before the
Closing Date and ending after the Closing Date shall be pro-rated as of the
Closing Date; provided, however, that if and to the extent that such Taxes are
-------- -------
reflected in the liabilities on the Closing Date Balance Sheet, such Taxes shall
be paid by Buyer.
ARTICLE II
CONSIDERATION
-------------
2.1. CONSIDERATION. The aggregate cash consideration for the
-------------
Assets purchased from the Selling Parties shall be $26,900,000 (the "Cash
Consideration"). The Cash Consideration shall be payable to the Selling Parties
as provided in Section 2.4 and shall be adjusted as provided in this Agreement.
The Cash Consideration shall be allocated among the Assets as provided in
Section 2.2. The consideration for the Assets contributed by the Contributing
Parties shall be the issuance to the Contributing Parties of the Class C-1
Limited Partnership Interest referred to in the Second Amended and Restated
Partnership Agreement (the "Partnership Interest", which defined term shall
include, where applicable, preferred stock of a corporation issued pursuant to
Sections 3.03 or 16.01, or any successor provision, of the Second Amended and
Restated Partnership Agreement). The Cash Consideration and the Partnership
Interest are hereinafter referred to collectively as the "Consideration". The
terms and conditions of the Partnership
8
<PAGE>
Interest and of the notes into which it shall be exchangeable are set forth in
the Second Amended and Restated Partnership Agreement. The Buyer and the
Transferors hereby agree that the net fair market value of the Assets to be
contributed by the Contributing Parties on the Closing Date is $5,000,000.
2.2. ALLOCATION OF CASH CONSIDERATION. The Cash Consideration
--------------------------------
(together with the amount of the Assumed Liabilities) shall be allocated by
Buyer among the Assets purchased from the Selling Parties consistent with the
appraisals and valuations of the Assets prepared by Buyer or an appraiser
selected by Buyer (collectively, the "Appraisal"). The amounts set forth in the
Appraisal will represent the agreed upon values of the Assets. Buyer shall
provide Comcast with a schedule of such tentative allocations based on the
Appraisal and consistent with the principles of Section 1060 of the Code at
least five days prior to the Closing Date. It is understood that the amounts of
such asset values are likely to change between the date the schedule is
delivered and the determination of the adjustment to the Cash Consideration as
provided in Section 2.3. The schedule of allocations provided by Buyer shall be
adjusted accordingly. Buyer shall provide such revised schedule of allocations
to Comcast within thirty (30) days after such determination, and such revised
schedule shall be final and binding on all the parties, absent manifest error.
The revised allocation schedule shall be used by the parties in preparing and
filing all relevant Tax Returns, and the parties agree to cooperate with each
other in good faith in preparing any such Tax Returns, including IRS Form 8594
and any required exhibits thereto (or other forms required pursuant to Section
1060 of the Code, or other applicable tax laws); provided, however, that in
-------- -------
determining the adjusted basis of Buyer with respect to any of the Assets, Buyer
may increase the amount allocated to any of the Assets to the extent permissible
under applicable tax laws for Buyer's additional costs and expenses that are
neither actually received nor treated as received by the Transferors pursuant to
such tax laws. The costs of obtaining the Appraisal shall be borne by Buyer.
2.3. CASH CONSIDERATION ADJUSTMENT. (a) The Cash Consideration
-----------------------------
will be adjusted as soon as practicable following the Closing in accordance with
this Section 2.3.
(b) As soon as practicable (but in no event later than ninety (90)
days after the Closing Date) Buyer shall prepare a consolidated statement of the
assets and liabilities of the Transferors for the categories included in the
column entitled "Adjusted as of March 31, 1993" on the March Balance Sheet as of
the Closing Date (the "Closing Date Balance Sheet") applying the same accounting
principles, practices, methods and adjustments, except as set forth in Section
2.5, which were applied in the preparation of the March Balance Sheet; provided,
--------
that, any
- ----
9
<PAGE>
Excluded Liabilities shall not be reflected as liabilities on the Closing Date
Balance Sheet.
(c) If the net assets (as reflected on the Closing Date Balance
Sheet by subtracting from total assets (which, for purposes of this Section 2.3
and Section 2.4, shall exclude cash (other than petty cash), plant, property and
equipment and deferred charges) reflected therein, liabilities reflected therein
which are within the categories reflected in the column entitled "Adjusted as of
March 31, 1993" on the March Balance Sheet) (the "Net Assets") are less than
$2,808,000, the Cash Consideration shall be reduced to the extent of the
difference between $2,808,000 and the Net Assets. If the Net Assets are more
than $2,808,000, the Cash Consideration shall be increased to the extent of the
difference between the Net Assets and $2,808,000.
(d) As soon as practicable (but not later than ninety (90) days)
after the Closing Date, Buyer will deliver to Comcast the Closing Date Balance
Sheet and calculation of the adjustments to the Cash Consideration in accordance
with Section 2.3(c) (the "Adjustment"). Buyer shall provide Comcast with copies
of all work papers, documents, receipts, invoices and other materials and access
to Buyer's personnel during regular business hours as may be necessary or
reasonably requested by Comcast in its review of the Closing Date Balance Sheet
and the Adjustment.
(e) In the event that Comcast contests any part of the revised
Cash Consideration, if any, and the Adjustment, if any, as set forth above,
Comcast shall give written notice of its objections thereto (a "Contest Notice")
within forty-five (45) days following the delivery of the Closing Date Balance
Sheet and the Adjustment. Any such Contest Notice shall specify in reasonable
detail the nature of any disagreement asserted and the amount claimed by
Comcast. If Comcast does not timely deliver a Contest Notice in accordance with
this Section 2.3(e), the Closing Date Balance Sheet and the Adjustment will be
final and binding on all the parties, absent manifest error.
(f) During the period of thirty (30) days following the timely
delivery of any Contest Notice, Buyer and Comcast shall attempt to resolve any
differences which Buyer and Comcast may have with respect to any matter
specified in the Contest Notice (which resolution, if any, shall be final and
binding on all the parties, absent manifest error). If, at the end of such
thirty (30) day period, Buyer and Comcast shall fail to reach written agreement
with respect to all of such matters, then all such matters specified in any
Contest Notice with respect to which such written agreement has not been reached
(the "Disputed Matters"), shall be submitted to an independent certified public
accounting firm selected by Buyer ("Buyer's Accountant") and an
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independent certified public accounting firm selected by Comcast ("Comcast's
Accountant") who shall attempt to resolve the Disputed Matters within the thirty
(30) day period immediately following such submission by either Buyer or Comcast
(which resolution, if any, shall be final and binding on all the parties). If
Buyer's Accountant and Comcast's Accountant shall fail to reach written
agreement with respect to the Disputed Matters within such thirty (30) day
period, the Disputed Matters shall be submitted to and arbitrated by a third
independent certified public accounting firm (the "Arbitrator") selected by
mutual agreement of Buyer's Accountant and Comcast's Accountant. The Arbitrator
shall consider only the Disputed Matters. The Arbitrator shall act promptly,
and the Arbitrator's decision with respect to all Disputed Matters shall be
final and binding upon the parties hereto.
(g) Buyer shall pay the fees and expenses of Buyer's Accountant,
and Comcast shall pay the fees and expenses of Comcast's Accountant. The fees
and expenses of the Arbitrator incurred in connection with its review and
determination of any Disputed Matters shall be borne one-half (1/2) by Buyer and
one-half (1/2) by Comcast.
2.4. CALCULATION OF CLOSING PAYMENT AND PAYMENT OF CASH
--------------------------------------------------
CONSIDERATION. (a) No more than five (5) nor less than two (2) business days
- -------------
prior to the Closing Date, Comcast, in consultation with the senior management
of the Transferors, shall prepare an estimated unaudited consolidated statement
of the assets and liabilities of the Transferors included on the March Balance
Sheet as of the Closing Date (the "Estimated Balance Sheet") applying the same
accounting principles, practices, methods and adjustments, except as set forth
in Section 2.5, which were applied in the preparation of the March Balance
Sheet; provided, that, any Excluded Liabilities shall not be reflected as
-------- ----
liabilities on the Estimated Balance Sheet.
(b) At the Closing, Buyer shall pay to Comcast (for the account of
the Selling Parties), by wire transfer of immediately available funds to an
account to be designated in writing by Comcast at least five (5) business days
prior to the Closing Date, an amount (the "Closing Payment") equal to the Cash
Consideration as increased or decreased by the amount, if any, of the Estimated
Balance Sheet Adjustment. The "Estimated Balance Sheet Adjustment" shall be
calculated based on the same principles as the calculation of the Adjustment,
except that with regard to the calculation of Net Assets, all balance sheet
references shall be to the Estimated Balance Sheet.
(c) If the Cash Consideration as adjusted pursuant to Section 2.3
exceeds the Closing Payment, then Buyer shall pay to Comcast (for the account of
the Selling Parties) the amount of such excess, together with interest thereon
from and including
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the Closing Date to but excluding the date of payment at the prime rate, by wire
transfer of immediately available funds within two business days of (i) the last
day for Comcast to deliver a Contest Notice, if no such Contest Notice is
delivered, or (ii) the date of the Arbitrator's determination with respect to
the Disputed Matters, the date on which Buyer's Accountant and Comcast's
Accountant mutually resolve the Disputed Matters or the date on which Buyer and
Comcast mutually resolve any differences contained in a Contest Notice, as the
case may be, if a Contest Notice is delivered by Comcast. Such prime rate shall
be the prime rate reported (or, if more than one rate is reported, the mean of
those reported) under "Money Rates" in The Wall Street Journal or, if not then
-----------------------
so reported, as reported in another published source agreeable to Buyer and
Comcast, on the business day preceding each relevant calculation date, and
interest shall be calculated on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be.
(d) If the Closing Payment shall have exceeded the Cash
Consideration as adjusted pursuant to Section 2.3, then Comcast shall pay to
Buyer the amount of such excess, together with interest thereon from and
including the Closing Date to but excluding the date of payment at the prime
rate (determined as provided in Section 2.4(c)), by wire transfer within two
business days of (i) the last day for Comcast to deliver a Contest Notice, if no
such Contest Notice is delivered, or (ii) the date of the Arbitrator's
determination with respect to the Disputed Matters, the date on which Buyer's
Accountant and Comcast's Accountant mutually resolve the Disputed Matters or the
date on which Buyer and Comcast mutually resolve any differences contained in a
Contest Notice, as the case may be, if a Contest Notice is delivered by Comcast.
2.5. PREPARATION OF ESTIMATED AND CLOSING DATE BALANCE SHEETS. In
--------------------------------------------------------
preparing the Estimated Balance Sheet and the Closing Date Balance Sheet:
(a) If the Closing occurs on December 31, 1993, accruals shall be
made under the category "Accrued Payroll & Taxes" for liabilities of Comcast
and/or the Transferors to employees of the Transferors who immediately after the
Closing Date shall become employees of Buyer that arise under the plans set
forth on Schedule 4.18(l).
(b) If the Closing occurs prior to December 31, 1993, accruals
shall be made under the category "Accrued Payroll & Taxes" for liabilities of
Comcast and/or the Transferors to employees of the Transferors who immediately
after the Closing Date shall become employees of Buyer that would have arisen
under the plans set forth on Schedule 4.18(l) with respect to the 1993 calendar
year if the Closing had not taken place until December 31, 1993 and such
employees had been employed by a Transferor on
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such date. The amount of any such accruals shall be calculated on a pro-rated
basis for the number of days elapsed in the 1993 calendar year prior to and
including the Closing Date; provided, however, that if the terms of an agreement
with any such employee set forth in Schedule 4.18(g) would result in the payment
of a greater amount to such employee than would otherwise be accrued in
accordance with this Section, then the accrual required hereunder shall be such
greater amount.
(c) Accruals shall be made under the category "Accrued Payroll &
Taxes" for any amounts Buyer will be required to pay as the employer's portion
of any applicable Federal, state and local Taxes, including FICA, FUTA and SUTA,
in connection with the payment by Buyer of the amounts accrued pursuant to
Section 2.5(a) and 2.5(b) hereof.
(d) No assets shall be recorded and no liabilities shall be
accrued which arise or have arisen out of the Muzak License Agreements.
(e) No liabilities other than (i) the liabilities for unpaid
portions of purchase price (including without limitation installment
obligations) with respect to prior Transfers (to Oland J. Chan and Comcast) of
the Peoria Property and (ii) liabilities under the mortgage on the Buffalo
Property if the holder of such mortgage elects not to be paid by Comcast or the
Transferors on or prior to the Closing Date shall be included in the category
entitled "Current Portion of Long Term Debt" and "Other Debt".
ARTICLE III
CLOSING
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3.1. CLOSING DATE. The Closing shall be consummated at 10:00 A.M.,
------------
local time, on the last business day of the month during which all the
conditions to each party's obligation to Close have been satisfied or waived, at
the offices of Rosenman & Colin, 575 Madison Avenue, New York, New York 10022 or
at such other place or time as shall be agreed upon by the parties hereto. The
time and date on which the Closing is actually held is referred to herein as the
"Closing Date".
3.2. COMCAST'S AND TRANSFERORS' CLOSING DELIVERIES. Subject to
---------------------------------------------
fulfillment or waiver of the conditions set forth in Article IX, at the Closing
Comcast or the Transferors shall deliver, or caused to be delivered, to Buyer
all the following:
(a) copies of Comcast's and each corporate Transferor's
certificate of incorporation certified as of a recent date by the Secretary of
State of the jurisdiction in
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which Comcast and each Transferor which is a corporation is organized;
(b) certified copies of the resolutions of Comcast's and each
Transferor's board of directors and of the Transferor's shareholders (or if a
Transferor is a partnership, of such Transferor's managing partner and any
consents required of any other partners of such Transferor) in connection with
the transactions contemplated hereby;
(c) certificates of legal existence, good standing and tax good
standing of Comcast and each Transferor which is a corporation, issued as of a
recent date by the Secretary of State of the jurisdictions in which Comcast and
each such Transferor is organized, certificates of good standing and tax good
standing of each jurisdiction in which a Transferor (other than CREH) is
qualified to transact business and certificates of good standing and tax good
standing evidencing that CREH is qualified to transact business in the State of
Texas;
(d) incumbency and specimen signature certificates dated the
Closing Date with respect to the officers of Comcast and the Transferors (or a
Transferor's managing partner, if such Transferor is a partnership) executing
this Agreement and any Transferor Ancillary Agreement;
(e) the opinion of counsel to Comcast and the Transferors referred
to in Section 8.12;
(f) Instruments of Assignment duly executed by the Transferors;
(g) to the extent then deliverable, certificates of title or
origin (or like documents) with respect to any vehicles or other equipment
included in the Assets for which a certificate of title or origin is required in
order to transfer title;
(h) all consents, waivers or approvals required by Article VIII,
including those relating to the Material Agreements, the Material Proprietary
Rights and the Governmental Permits, obtained by Comcast or the Transferors in
connection with the Transfer of the Assets or the consummation of the
transactions contemplated hereby;
(i) the certificates contemplated by Sections 8.1 and 8.2;
(j) each other document then required to be delivered by the
Transferors pursuant to Article VII or VIII;
(k) the Non-Competition Agreement duly executed by Comcast and the
Transferors;
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(l) the Intellectual Property Assignment;
(m) the Second Amended and Restated Partnership Agreement executed
by the Contributing Parties;
(n) the affidavit referred to in Section 7.9;
(o) certified copies of documents evidencing the effectiveness of
the transactions contemplated by Section 7.29, including certificates of merger
or similar documents certified by the Secretary of State of the applicable
jurisdictions and evidence of termination and dissolution of the Partnership and
distribution of the Partnership's Assets in accordance with Section 7.29.
3.3. BUYER'S CLOSING DELIVERIES. Subject to fulfillment or waiver
--------------------------
of the conditions set forth in Article VIII, at the Closing Buyer shall deliver,
or cause to be delivered, to the Transferors all the following:
(a) copies of Buyer's, MLP Acquisition's and Music Holdings'
certificate of limited partnership or incorporation certified as of a recent
date by the Secretary of State of Delaware;
(b) certificates of legal existence, good standing and tax good
standing of Buyer, MLP Acquisition and Music Holdings issued as of a recent date
by the Secretary of State of Delaware;
(c) certified resolutions of Music Holdings with respect to the
transactions contemplated hereby and incumbency and specimen signature
certificates dated the Closing Date with respect to the officers of Music
Holdings executing this Agreement and any Buyer Ancillary Agreement;
(d) the opinion of counsel to Buyer referred to in Section 9.8;
(e) Instruments of Assumption duly executed by Buyer;
(f) the certificate contemplated by Section 9.1;
(g) each other document required to be delivered by Buyer pursuant
to Article IX;
(h) the Non-Competition Agreement duly executed by Buyer; and
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(i) the Second Amended and Restated Partnership Agreement executed
by or on behalf of all parties other than the Contributing Parties.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMCAST AND THE TRANSFERORS
-------------------------------------------------------------
Comcast and the Transferors, jointly and severally, represent and
warrant to Buyer as follows:
4.1. ORGANIZATION OF THE TRANSFERORS AND COMCAST. (a) Each
-------------------------------------------
Transferor is a corporation or partnership duly organized, validly existing and
in good standing under the laws of its jurisdiction of formation as set forth in
Schedule 4.1. Each Transferor (excluding CREH, except with respect to the
Irving Property) is duly qualified to transact business as a foreign corporation
or partnership and is in good standing in each jurisdiction in which the
Transferors are required to qualify as set forth in Schedule 4.1(a). The
Transferors have the corporate or partnership power and authority to own or
lease and to operate and use the Assets and to carry on the Business as now
conducted.
(b) Comcast is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania.
4.2. SUBSIDIARIES, INVESTMENTS AND CAPITALIZATION. (a) Except for
--------------------------------------------
marketable securities set forth on Schedule 4.2, no Transferor (other than
CREH), directly or indirectly, owns, of record or beneficially, any outstanding
voting securities or other equity interests in any corporation, partnership,
joint venture or other entity other than another Transferor.
(b) All of the capital stock of each Transferor which is a
corporation is owned by Comcast or a Transferor. The only partners of the
Partnership are Comcast Sound Communications, Inc., an Illinois corporation, and
Comcast Sound Communications, Inc., an Indiana corporation. There are not
outstanding any warrants, options or rights to purchase or otherwise acquire any
shares of capital stock or partnership interests of any Transferor.
(c) Except as provided in Section 7.29, there is no plan or
intention on the part of Comcast or the Contributing Parties to terminate,
liquidate or dissolve (whether by liquidation, merger or otherwise) either of
the Contributing Parties.
4.3. AUTHORITY OF THE TRANSFERORS AND COMCAST; NON-CONTRAVENTION.
-----------------------------------------------------------
(a) The Transferors have the corporate or
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partnership power and authority to execute, deliver and perform this Agreement
and all the Transferor Ancillary Agreements to which they are a party.
(b) The execution, delivery and performance hereof and of the
Transferor Ancillary Agreements by the Transferors party thereto have been duly
authorized and approved by all requisite corporate or partnership action. This
Agreement has been duly authorized, executed and delivered by the Transferors
and is the legal, valid and binding obligation of the Transferors enforceable
(subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors' rights and to general
equity principles) in accordance with its terms, and each of the Transferor
Ancillary Agreements has been duly authorized by the Transferors party thereto,
and upon execution and delivery by such Transferors will be a legal, valid and
binding obligation of such Transferors enforceable (subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general equity principles) in
accordance with its terms.
(c) Except as set forth in Schedule 4.3, neither the execution and
delivery hereof or of any of the Transferor Ancillary Agreements nor the
consummation of any of the transactions contemplated hereby or thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will, with or without notice and/or the lapse of time:
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights, or result in the creation or imposition of any Encumbrance upon any
of the Assets under, (A) the certificate of incorporation or by-laws or
partnership agreement, as applicable, of the Transferors, (B) any Material
Agreement or Material Proprietary Right, (C) any material note, mortgage,
franchise, authorization or right, to which any of the Transferors is a
party or any of the Assets is subject or by which any of the Transferors is
bound, or (D) any Governmental Rule to which any of the Transferors is a
party or any of the Assets is subject or by which any of the Transferors is
bound which would result in a material adverse effect on the Business taken
as a whole or the Assets; or
(ii) require the approval, consent, authorization or act of, or the
making by the Transferors of any declaration, filing or registration with,
(A) any Governmental Body, except for required filings with the Federal
Trade Commission and the Department of Justice pursuant to HSR, or (B)
17
<PAGE>
any third party, as to (x) any Material Proprietary Rights or (y) any
Material Agreement.
(d) Comcast has the corporate power and authority to execute,
deliver and perform this Agreement.
(e) The execution, delivery and performance hereof by Comcast has
been duly authorized and approved by all requisite corporate action. This
Agreement has been duly authorized, executed and delivered by Comcast and is the
legal, valid and binding obligation of Comcast enforceable (subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to general equity
principles) in accordance with its terms.
(f) Except as set forth in Schedule 4.3, neither the execution and
delivery hereof or the consummation of any of the transactions contemplated
hereby nor compliance with or fulfillment of the terms, conditions and
provisions hereof will, with or without notice and/or the lapse of time:
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, (A) the certificate of incorporation or by-laws of Comcast,
(B) any material note, instrument, agreement, mortgage, lease, license,
franchise, permit or other authorization, right, restriction or obligation
to which Comcast is a party or by which Comcast is bound, or (C) any
Governmental Rule to which Comcast is a party or by which Comcast is bound
which would result in a material adverse effect on the Business taken as a
whole or the Assets; or
(ii) as to Comcast, require the approval, consent, authorization or
act of, or the making by Comcast of any declaration, filing or registration
with, (A) any Governmental Body, except for required filings with the
Federal Trade Commission and the Department of Justice pursuant to HSR, or
(B) any third party.
4.4. FINANCIAL STATEMENTS. Schedule 4.4 contains the audited
--------------------
consolidated Balance Sheets of the Transferors (other than CREH) as of December
31, 1992, 1991 and 1990 and the related Statements of Operations and Statements
of Cash Flows for each of the three years ended December 31, 1992, 1991 and
1990, including the notes thereto, certified by Meek and McLeod, and the
unaudited consolidated Balance Sheet of the Transferors (other than CREH) as of
the March Balance Sheet Date and the related Statement of Operations for the
three month period ended the March Balance Sheet Date, all of which have been
delivered to Buyer. Such financial statements present fairly, in all material
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respects, the financial condition of the Transferors (other than CREH) as of
December 31, 1992, 1991 and 1990 and the March Balance Sheet Date, respectively,
and the results of such Transferors' operations and cash flows for each of the
three years ended December 31, 1992, December 31, 1991 and December 31, 1990 and
the three month period ended the March Balance Sheet Date, all in conformity
with GAAP on a consistent basis and as applied by such Transferors in the
preparation of the column in the March Balance Sheet entitled "Actual as of
March 31, 1993", subject, in the case of the March Balance Sheet and the related
Statement of Operations, to normal year end adjustments and the absence of
footnotes.
4.5. ABSENCE OF CHANGES. (a) Except as set forth in Schedule
------------------
4.5(a) and except for changes in general economic conditions, since the March
Balance Sheet Date there has been no material adverse change in the Assets taken
as a whole, the Business or the operations or financial condition of the
Transferors (excluding CREH, except with respect to the Irving Property).
(b) Except as set forth in Schedule 4.5(b), since the March
Balance Sheet Date the Transferors (excluding CREH, except with respect to the
Irving Property) have conducted the Business only in the ordinary course.
Without limiting the generality of the foregoing, since the March Balance Sheet
Date, except as set forth in such Schedule, none of the Transferors (excluding
CREH, except with respect to the Irving Property) has:
(i) Sustained any material damage, or any destruction, damage by
fire, accident or other casualty of or to any of the Assets, whether or not
covered by insurance;
(ii) Paid, discharged or satisfied any material claims, liabilities
or obligations (absolute, accrued, contingent or otherwise) in connection
with, relating to or affecting in any way the Assets or the Business, other
than the payment, discharge or satisfaction of such claims, liabilities or
obligations in the ordinary course of business;
(iii) Cancelled or compromised any material debts without fair
consideration therefor, or waived any material claims or rights of
substantial value in connection with, relating to or affecting in any way
the Business;
(iv) Sold, transferred, assigned, leased, abandoned or otherwise
disposed of any of its properties or assets (real, personal or mixed,
tangible or intangible) in an amount in excess of $25,000, except for raw
materials, inventory or equipment disposed of in the ordinary course of
business;
19
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(v) Granted any increase (including any increase pursuant to any
bonus, pension, profit sharing or other plan or commitment) in the
compensation payable or to become payable to any employee of the
Transferors whose anticipated 1993 compensation (including bonuses in
accordance with the Transferors' past practice and commissions or other
contingent compensation) ("Anticipated 1993 Compensation") is at least
$50,000 (other than any such increase pursuant to collective bargaining
agreements);
(vi) Entered into any contract, arrangement or lease in an amount
in excess of $25,000, except (i) trade or business contracts or
arrangements entered into in the ordinary course of business or (ii) any
contract or arrangement set forth in any Schedule to this Agreement;
(vii) Waived or released any material right under or amended or
terminated in any material respect any Material Agreement;
(viii) Made any change in its accounting methods or practices;
(ix) Materially changed any of its significant business policies;
(x) Terminated or failed to exercise any option to renew any
Material Agreement;
(xi) Made any distribution of assets other than cash to any
Transferor Group Member or Affiliate of the Transferors;
(xii) Incurred any lockouts or strikes or, to the Knowledge of
Comcast or the Transferors, any dispute (other than routine individual
grievances) or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Transferors not
already subject to a collective bargaining agreement, material slowdowns,
work stoppages or, to the knowledge of Comcast or the Transferors, threats
thereof by or with respect to such employees;
(xiii) Disposed of or permitted to lapse any Material Proprietary
Rights, or other than as contemplated by this Agreement disclosed to any
Person, except as may be required by law or to governmental agencies, or
affiliates or representatives of Transferor, any Proprietary Rights
comprising part of the Assets not theretofore a matter of public knowledge;
or
20
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(xiv) Agreed, whether in writing or otherwise, to take any action
described in this Section 4.5.
4.6. [INTENTIONALLY OMITTED].
---------------------
4.7. TAXES. (a) Except as set forth in Schedule 4.7(a), and
-----
except for personal property Tax Returns and city income or franchise Tax
Returns, as to which the aggregate Taxes required to be shown thereon do not
exceed $100,000, Comcast or the Transferors, as applicable, have timely filed
with the appropriate Governmental Bodies all Tax Returns which are required to
be filed, and have duly paid to the appropriate Governmental Bodies all Taxes
which are required to be paid, in each case with respect to the Business or the
Assets, including, without limitation, all Taxes withheld from employees' wages
and all other Taxes due or claimed to be due by any Governmental Body. Such Tax
Returns properly reflect the Taxes payable for the periods covered thereby. All
such Taxes due for taxable periods ending on or prior to the Closing Date have
been, or will be, timely paid by Comcast or the Transferors or (in the case of
Taxes not yet due and payable and included in the category entitled "Accrued
Payroll & Taxes" reflected on the March Balance Sheet) will be properly accrued
and fully provided for in accordance with GAAP as applied by the Transferors in
preparation of the March Balance Sheet (subject to the provisions of Section
2.5) as part of the liabilities shown on the Closing Date Balance Sheet. Except
as set forth on Schedule 4.7(a), neither Comcast nor any Transferor has waived
the statute of limitations on the right of any Governmental Body to assess any
additional Taxes or to contest the items reported on any such Tax Returns.
Except as set forth in Schedule 4.7(a), since December 31, 1987, no issue has
been raised by any Governmental Body in connection with any prior, pending or
ongoing examination relating to Taxes with respect to the Business or the
Assets, and there are no unresolved issues or deficiencies relating to any such
examination.
(b) The Transferors have provided Buyer with true and (except as
noted on Schedule 4.7(b)) complete copies of all Tax Returns (or portions
thereof) identified on Schedule 4.7(b) and filed by Comcast or the Transferors
with respect to the Transferors, the Business or the Assets.
(c) Schedule 4.7(c) lists all Tax Returns with respect to the
Transferors, the Business or the Assets which were required to be filed on or
after January 1, 1989 and which have been audited by any Governmental Bodies,
and indicates the status of any unresolved issues or deficiencies relating to
any such audits.
(d) Each Transferor's aggregate adjusted tax basis in the Assets
sold or contributed by such Transferor, as the case
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may be, for U.S. Federal income tax purposes, as of December 31, 1992, is as set
forth on Schedule 4.7(d). The allocation of each Contributing Party's aggregate
adjusted tax basis (as of December 31, 1992) in the Assets to be contributed by
such party among the asset classes used in calculating the taxable income (loss)
of such Contributing Party for U.S. Federal income tax purposes is as set forth
on Schedule 4.7(d).
4.8. CONDITION OF ASSETS; OWNERSHIP OF ASSETS; BUSINESS ACTIVITY.
-----------------------------------------------------------
(a) Except as set forth in Schedule 4.8(a) and except for the Excluded Assets,
the material tangible Assets are serviceable or in working order and, in either
such case, suitable for use in accordance with the past practices of the
Transferors. The Transferors have adopted and follow reasonable maintenance
policies with respect to material tangible Assets owned or leased by the
Transferors. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SPECIFICALLY SET
FORTH HEREIN, ALL THE ASSETS SOLD HEREUNDER ARE SOLD TO BUYER WITHOUT IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR INTENDED USE OR OTHERWISE.
(b) Neither Comcast nor any Affiliate of Comcast other than the
Transferors is engaged in the Business or owns or holds any properties or assets
that are used in the Business.
(c) None of the Transferors is or has been engaged in any business
or activity other than the Business and other activities authorized by license
agreements with Buyer, except that (i) one or more of the Transferors holds
stock or other interests in another Transferor and (ii) CREH has business
activities other than ownership of the Irving Property.
4.9. GOVERNMENTAL PERMITS. (a) Each of the Transferors owns,
--------------------
holds or possesses all licenses, franchises, permits, privileges, immunities,
approvals and other authorizations from a Governmental Body which are necessary
to entitle it to own or lease, operate and use the Assets and to carry on and
conduct the Business substantially as currently conducted except for such items
as to which the failure to so own, hold or possess would not have a material
adverse effect on the Assets, the Business or the operations or financial
condition of the Transferors ("Governmental Permits").
(b) Schedule 4.9(b) sets forth a list and brief description of
each Governmental Permit held by the Transferors as of the date hereof. Except
as set forth in Schedule 4.9(b), (i) the Transferors have fulfilled and
performed in all material respects their obligations under each of the
Governmental Permits listed on Schedule 4.9(b), and no event has occurred or
condition or state of facts exists which constitutes or, after notice or lapse
of time or both, would constitute a material breach or default by the
Transferors under any such Governmental Permit or
22
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which permits or, after notice or lapse of time or both, would permit revocation
or termination of any such Governmental Permit; and (ii) no notice of
cancellation, of default or of any dispute concerning any Governmental Permit,
or of any event, condition or state of facts described in the preceding clause,
has been received by the Transferors.
(c) Other than Governmental Permits, no Transferor owns or holds
any licenses, franchises, permits, privileges, immunities, approvals or other
authorizations from any Governmental Body the absence of which would have a
material adverse effect on the Business taken as a whole or on the Assets.
4.10. REAL PROPERTY. (a) The Transferors (other than CREH) own no
-------------
real property or any interest in real property except as lessee and own no
options to acquire any real property or any interest in real property except as
lessee, other than the certain parcels of real property located in Dallas, Texas
(the "Dallas Property"), Irving, Texas (the "Irving Property"), Peoria, Illinois
(the "Peoria Property") and Buffalo, New York (the "Buffalo Property"; the
Dallas Property, Irving Property, Peoria Property and Buffalo Property
collectively referred to as the "Properties").
(b) Comcast Sound Communications, Inc., a New York corporation,
Comcast Sound Communications, Inc., a Texas corporation, and CREH, owns legal
and beneficial fee title to the Buffalo Property, Dallas Property and Irving
Property, respectively, and Comcast Sound Communications, Inc., an Illinois
corporation, owns beneficial fee title to the Peoria Property, in each case free
and clear of all Encumbrances other than the Encumbrances set forth on Schedule
4.10(b).
(c) There are no agreements (written or oral) in the nature of space
leases, licenses, permits, franchises, concessions or occupancy agreements
affecting the Properties.
(d) There are no special or other assessments for public improvements
or otherwise now affecting the Properties and neither Comcast nor the
Transferors have any Knowledge of (i) any pending or threatened special
assessments affecting the Properties or (ii) any contemplated improvements
affecting the Properties that may result in special assessments affecting the
Properties.
(e) The Properties and the current use, occupation and condition
thereof do not violate any applicable deed restrictions, easements or other
covenants, restrictions or agreements, site plan approvals, zoning or
subdivision regulations or urban redevelopment plans applicable to the
Properties and, except as set forth in Schedule 4.10(b), no
23
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improvements constructed thereon encroach upon any adjacent properties or any
public thoroughfare or right of way.
(f) Neither Comcast nor the Transferors have Knowledge of any plans
of any Governmental Body to change the highway or road system in the vicinity of
the Properties or to restrict or change access from any such highway or road to
the Properties or of any pending or threatened condemnation or eminent domain
proceedings relating to or affecting the Properties.
(g) To the Knowledge of Comcast and the Transferors, there are no
outstanding requirements or recommendations by any insurance company that issued
a policy with respect to the Properties or by any board of fire underwriters or
other body exercising similar functions, requiring or recommending any material
repairs or work to be done at the Properties.
(h) The Transferors have not elected to use an alternative
depreciation system as defined in (S)168(g)(7) of the Code.
(i) No services, material or work have been supplied to the
Properties for which payment has not been made in full.
4.11. REAL PROPERTY LEASES. Schedule 4.11 sets forth a list and
--------------------
brief description of each lease or similar agreement (showing the parties,
expiration date, renewal and purchase options, if any, the uses being made
thereof and the location) under which a Transferor (other than CREH) is lessee
of, or holds or operates, any real property owned by any Person other than such
Transferor. All leases are in full force and effect, free of subtenancies,
except as set forth in Schedule 4.11, or other occupancy rights. True and
complete copies of the leases and other agreements listed in Schedule 4.11 have
been delivered or made available to Buyer.
4.12. CONDEMNATION. As of the date hereof, to the knowledge of
------------
Comcast and the Transferors, (a) neither the whole nor any part of any of the
real property listed or described in Schedule 4.11 is subject to any pending
suit for condemnation or other taking by any Governmental Body, and (b) no such
condemnation or other taking is threatened or contemplated.
4.13. PERSONAL PROPERTY; SUFFICIENCY OF ASSETS. The Transferors
----------------------------------------
have delivered to Buyer a list of all fixed assets (other than the Property)
owned by the Transferors (excluding CREH, except with respect to the Irving
Property) as of September 30, 1993, setting forth the net book value thereof,
which list has been prepared by the Transferors in a manner consistent with the
Transferors' ordinary course record keeping and operations. Except as set forth
on Schedule 4.13, the Assets (other than the Properties) are free and clear of
all Encumbrances other than
24
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Permitted Encumbrances; provided, that, for purposes of this Section 4.13,
--------
Permitted Encumbrances shall not include any mechanics', materialmen's and
similar liens.
4.14. PERSONAL PROPERTY LEASES. Schedule 4.14 contains a brief
------------------------
description of each lease, license or other agreement (including in each case
the annual rental, the expiration date thereof and a brief description of the
property covered) under which a Transferor (excluding CREH, except with respect
to the Business) is lessee of, or holds or operates for its own use, any
machinery, equipment, vehicle or other tangible personal property owned by a
Person other than such Transferor, except any such lease, license or other
agreement providing for base payments aggregating less than $25,000 over its
term (excluding renewal options) or which is terminable without penalty on sixty
(60) days' or less notice. Except as set forth on Schedule 4.14 and excluding
Encumbrances on lessors' properties, the interests of the Transferors in such
property are free and clear of all Encumbrances other than Permitted
Encumbrances. True and complete copies of the leases, licenses and other
agreements listed in Schedule 4.14 have been delivered or made available to
Buyer.
4.15. INTELLECTUAL PROPERTY. (a) Schedule 4.15 contains a list of
---------------------
the following Proprietary Rights, in each case as of the date hereof (the
"Material Proprietary Rights"):
(i) For each patent, the patent number and date, a description of
the Invention, and the expiration date;
(ii) For each owned trademark, the name, registration number and
date, and goods and/or services in connection with which the trademark is
used, and for each licensed trademark (other than ordinary course
commercial software) the licensor thereof;
(iii) For each tradename, the mark, the date first used, and the
goods and/or services in connection with which the tradename is used;
(v) For each copyright, if registered, the registration number
and date; and
(vi) If any registrations or applications for any of the foregoing
are in process, a description of the status thereof.
(b) Except as set forth in Schedule 4.15, the applicable
Transferor is either:
(i) the sole and exclusive owner of all rights obtainable in the
Material Proprietary Rights; or
25
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(ii) possesses adequate rights to use all of such Material
Proprietary Rights in connection with the Business as presently conducted.
(c) No Material Proprietary Right violates or infringes the
personal or property rights of any person, firm or corporation and, except as
set forth in Schedule 4.15, no claims of any such violation or infringement are
pending or, to the Knowledge of Comcast or the Transferors, threatened.
(d) Except as set forth in Schedule 4.15, there is not now pending
or, to the Knowledge of Comcast or the Transferors, threatened any action, suit,
claim, assessment or proceeding, to challenge the validity, ownership or use of
any of the Material Proprietary Rights, or to revoke, cancel, rescind, modify or
refuse to renew in the ordinary course of business any of such Material
Proprietary Rights as may have been registered by a Transferor.
(e) Except as set forth on Schedule 4.15, other than Material
Proprietary Rights, there are no Proprietary Rights the absence of which would
have a material adverse effect on the Business taken as a whole or on the
Assets.
4.16. ACCOUNTS RECEIVABLE. All accounts receivable of the
-------------------
Transferors have arisen from bona fide transactions by the Transferors in the
ordinary course of the Business.
4.17. ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule
---------------------
4.17, the Transferors have obtained and continue to maintain property and
permits, licenses, consents and approvals necessary for conducting the Business
which are required under Environmental Laws ("Environmental Approvals"), and the
Transferors have not operated the Business in violation of any Environmental Law
or the terms of any Environmental Approval.
(b) Except as set forth in Schedule 4.17:
(i) The Transferors (excluding CREH, except with respect to the
Irving Property) have not used, stored, generated, discharged, emitted,
transported, disposed of or treated Hazardous Substances except in a manner
which complies with Environmental Laws.
(ii) To the Knowledge of Comcast or the Transferors, no prior
owner, occupant, tenant or user of any Facility has ever used, stored,
generated, discharged, emitted, transported, disposed of or treated
Hazardous Substances, at, on or from any Facility except in compliance with
all Environmental Laws.
26
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(iii) To the Knowledge of Comcast or the Transferors, there is not,
and there has not been, any Environmental Condition or release, or threat
of release (as those terms are defined in Section 101 of CERCLA) of
Hazardous Substances at, on, or from any Facility.
(c) Except as set forth in Schedule 4.17, all Environmental
Approvals may be Transferred to Buyer.
(d) Except as set forth in Schedule 4.17, neither Comcast nor the
Transferors (excluding CREH, except with respect to the Irving Property) have
received written notice of any pending or threatened investigation, claims,
enforcement proceedings, cleanup orders, citizen suits or other actions
instituted by any private party, employee or Governmental Body arising out of
the conduct or the operations of the Business, in connection with any
Environmental Laws, or as a result of any Environmental Condition at any
Facility.
4.18. EMPLOYEES AND RELATED AGREEMENTS; ERISA. (a) Except as set
---------------------------------------
forth on Schedule 4.18(a), none of Comcast, any Transferor or any subsidiary or
ERISA Affiliate of any Transferor or any subsidiary thereof maintains, sponsors,
contributes to or is obligated to contribute to, or during the five (5) years
ending on the date hereof, has maintained, sponsored, contributed to or was
obligated to contribute to, and none of Comcast, any Transferor or any
subsidiary or ERISA Affiliate of any Transferor or any subsidiary thereof have
any liability (including, without limitation, a liability arising out of an
indemnification, guarantee, hold harmless or similar agreement) or obligation
with respect to, any Benefit Plan. Except as set forth in Schedule 4.18(a), no
severance pay policy or procedure is maintained by Comcast, any Transferor or
any subsidiary thereof which does or could apply to the employees of Comcast,
any Transferor or any subsidiary thereof in any form whether written or
unwritten and whether or not disclosed to one or more employees. Except as
specifically identified and set forth in Schedule 4.18(a), none of Comcast, any
Transferor or any subsidiary or ERISA Affiliate of any Transferor or any
subsidiary thereof maintains, sponsors, contributes to or is obligated to
contribute to, or during the five (5) years ending on the date hereof, has
maintained, sponsored, contributed to or was obligated to contribute to any
Multiemployer Plan.
(b) No event has occurred in connection with which Comcast, any
Transferor or any subsidiary or ERISA Affiliate of any Transferor or any
subsidiary thereof or any "plan administrator" (as defined in Section 3(16) of
ERISA) directly or indirectly, is or could be subject to liability, contingent
or otherwise, or any lien, whether or not perfected, under the terms of any
Benefit Plan or Multiemployer Plan or under ERISA, the Code, including, without
limitation, Sections 302(f), 4062, 4063,
27
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4064, 4068, 4069, 4071 or 4201 of ERISA, or Sections 412(n), 4971, 4976 of the
Code, or under any agreement, instrument, statute, rule of law or regulation
pursuant to or under which Comcast, any Transferor or any subsidiary or ERISA
Affiliate of any Transferor or any subsidiary thereof has agreed to indemnify or
is required to indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirements of any such statute, rule of
law or regulation.
(c) [Intentionally Omitted]
(d) With respect to each Multiemployer Plan identified in Schedule
4.18(a), to the Knowledge of Transferor, (a) the trustees of each such
Multiemployer Plan have not instituted proceedings to terminate, reorganize or
merge any such Multiemployer Plan; (b) no condition or event exists or has
occurred which presents a material risk of the termination, reorganization or
merger of any such Multiemployer Plan which could result in the imposition on
Comcast, any Transferor or any subsidiary or ERISA Affiliate of any Transferor
or any subsidiary thereof of any liability under Title IV of ERISA or otherwise,
whether to the PBGC or otherwise, including, without limitation, termination
liability, withdrawal liability or partial withdrawal liability; (c) no such
Multiemployer Plan has filed an application for financial assistance pursuant to
the provisions of Section 4245(f) or 4281(d) of ERISA; (d) no contribution to
any such Multiemployer Plan required of any Transferor or any subsidiary of any
Transferor pursuant to the terms thereof or of any collective bargaining
agreement is nondeductible by reason of any provisions of Section 412 of the
Code; and (e) no liability under Section 4201 of ERISA or otherwise under Title
IV of ERISA would exist if Comcast, any Transferor or any subsidiary or ERISA
Affiliate of any Transferor or any subsidiary thereof withdrew from or cease to
be an employer under any Multiemployer Plan.
(e) All payments and contributions due from any Transferor or any
subsidiary of any Transferor under each Benefit Plan and Multiemployer Plan
identified in Schedule 4.18(a) have been made.
(f) The transactions contemplated by this Agreement will not
result in any payment or series of payments by Buyer based upon any actions of
Comcast or any Transferor to any person of a parachute payment within the
meaning of Section 280G of the Code.
(g) Except as set forth in Schedule 4.18(g), the consummation of
the transactions contemplated by this Agreement will not (i) entitle any
employee or former employee of any Transferor or any subsidiary of any
Transferor (including any such person who becomes an employee of Buyer) to
severance pay, or any other payment or (ii) result in any prohibited transaction
28
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described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available. True and complete copies of the arrangements
referred to in Schedule 4.18(g) have been provided to Buyer.
(h) Except as set forth in Schedule 4.18(h), none of any
Transferor or any subsidiary of any Transferor is a party to any collective
bargaining agreements, whether or not expired. With the exception of
representation pursuant to such agreements, there are no labor unions or other
organizations representing or attempting to represent any employee of any
Transferor or any subsidiary of any Transferor. All employee benefit plans (as
defined in Section 3(3) of ERISA) which are specifically referred to in any
collective bargaining agreement are listed in Schedule 4.18(h) and are
specifically identified as such in Schedule 4.18(h).
(i) No Transferor has violated any provision of any Governmental
Rule, or any order, ruling, decree, judgment or arbitration award of any court,
arbitrator or any Government Body regarding the terms and conditions of
employment of employees, former employees or prospective employees or other
labor related matters, including, without limitation, Governmental Rules,
orders, rulings, decrees, judgments and awards relating to discrimination
(including without limitation discrimination on the basis of age, sex, race or
religion), fair labor standards and occupational health and safety, wrongful
discharge or violation of the personal rights of employees, former employees or
prospective employees or state temporary disability laws, rules or regulations.
(j) There is no unfair labor practice charge or complaint pending
or, to the Knowledge of Transferors, threatened against any Transferor or any
subsidiary of any Transferor before the National Labor Relations Board of any
State Labor Relations Board. There are no claims of discrimination of any kind
pending or, to the Knowledge of Transferors, threatened against any Transferor
or any subsidiary of any Transferor before any Governmental Body, except as set
forth in Schedule 4.18(j).
(k) There is no labor strike or, to the Knowledge of Transferor,
dispute, material slowdown, material work stoppage or lockout actually pending
or, to the Knowledge of Transferor, threatened against any Transferor or any
subsidiary of any Transferor.
(l) Schedule 4.18(l) sets forth (i) a true and complete copy (or,
if no such copy exists, a description) of all bonus arrangements with employees
of the Transferors other than bonus arrangements set forth on Schedule 4.18(g)
(the "Bonus Plans"), and (ii) the names of employees of the Transferors who are
eligible or may become eligible to receive bonuses for the
29
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1993 calendar year and, to the extent applicable, the amount received by such
employees for the preceding period under the Bonus Plans.
(m) Schedule 4.18(m) sets forth a true and complete copy of "The
Comcast Corporation Supplemental Retirement-Investment Plan" as in effect as of
the date hereof.
4.19. CONTRACTS. (a) Except as set forth on Schedule 4.19(a):
---------
(i) There are no binding contracts, commitments or agreements for
the purchase of any equipment, materials or supplies that (individually or
in a series of related transactions by a single Transferor) involve an
expenditure by a Transferor in excess of $50,000 over the remaining term of
each such contract, commitment or agreement;
(ii) There are no contracts or other agreements or commitments for
the sale of goods or services (other than agreements set forth on Schedule
4.19(b)) that (individually or in a series of related transactions with a
single Transferor) involve a payment to a Transferor in excess of $50,000
per annum;
(iii) There are no written contracts for the employment or
compensation of any employee whose Anticipated 1993 Compensation is in
excess of $50,000 or which are not terminable on sixty (60) days' or less
notice;
(iv) There are no partnership or joint venture contracts or
arrangements or any other agreements involving a sharing of revenues or
profits to which a Transferor is a party or by which a Transferor is bound;
(v) Except as described in Section 4.15 or a Schedule thereto, and
except for ordinary course commercial software or personal property leases,
there are no licenses to which a Transferor is a party or by which a
Transferor is bound relating to the use of personal or property rights of
others, there are no licenses granted to others to use the Proprietary
Rights, and there are no royalty contracts to which a Transferor is a party
or by which a Transferor is bound (individually or in a series of related
transactions by a single Transferor) involving annual payments in excess of
$50,000;
(vi) There are no contracts or agreements for the sale of any of
the Assets (other than sales in the ordinary course of business) or the
grant of any rights to purchase any of the Assets;
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(vii) There are no contracts or agreements with consultants,
advisors, salespeople, sales representatives, distributors, lobbyists,
dealers or independent contractors to which a Transferor is a party or by
which a Transferor is bound other than those which a Transferor enters into
with salespeople in the ordinary course of business, the standard form of
which (from which there are no material deviations) is set forth in
Schedule 4.19(a);
(viii) There are no contracts or agreements to which a Transferor is
a party or by which such Transferor is bound, other than contracts or
agreements with Buyer, relating to the use of customer lists; and
(ix) There are no contracts or agreements to which a Transferor is
a party or by which such Transferor is bound pursuant to which such
Transferor transmits programming on subcarrier frequencies (each such
contract and agreement referred to herein as an "SCA Agreement" and the
counterparty to each such contract and agreement listed in Schedule 4.19(a)
referred to herein as a "SCA Lessor").
(b) Schedule 4.19(b) sets forth a list of each contract or other
agreement between a Transferor and a subscriber of the Business which provides
for recurring revenues under a single contract or other agreement of $500 or
more per month. Such Schedule sets forth the name of each such subscriber, and,
to the extent set forth therein, the recurring monthly dollar amount under such
contract or other agreement and the termination date of such contract or other
agreement.
(c) True and complete copies of the contracts, agreements,
commitments, leases and other instruments listed in Schedules 4.19(a) and
4.19(b) have been delivered or made available to Buyer, except "Muzak National
Account Agreements", and the reverse side of the printed standard form service
agreements of the Transferors (the forms of which are included in Schedule
4.19(b)).
4.20. [INTENTIONALLY OMITTED].
---------------------
4.21. STATUS OF CONTRACTS. Except as set forth in Schedule 4.21,
-------------------
each of the leases, licenses, contracts and other agreements listed in Schedule
4.11, 4.14, 4.15, 4.18 (other than Schedule 4.18(h), 4.19(a) or 4.19(b)
("Material Agreements") constitutes a valid and binding obligation of the
Transferor party thereto and is in full force and effect. Except as set forth
in Schedule 4.3 and except for Material Agreements which by their terms will
expire prior to the Closing Date or otherwise terminate prior to the Closing
Date in accordance with the provisions thereof or that constitute Excluded
Assets, the Material Agreements may be Transferred to Buyer pursuant to this
31
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Agreement without breaching the terms thereof or resulting in the forfeiture or
impairment of any rights thereunder and without the consent, approval or act of,
or the making of any filing with, any other party. No Transferor is in material
default under any of the Material Agreements and no event has occurred and no
condition or state of facts exists which, with the passage of time or the giving
of notice or both, would constitute such a default by a Transferor. To the
knowledge of the Transferors, no other party to any of the Material Agreements
is in material default thereunder.
4.22. NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as set
---------------------------------------------
forth in Schedule 4.22:
(a) The Transferors and Comcast are in compliance in all material
respects with all Governmental Rules which are applicable to the Assets or the
Business;
(b) There are no lawsuits, claims, suits, audits, proceedings or,
to the Knowledge of Comcast or the Transferors, investigations pending or
threatened against any of the Transferors or relating to the Business other
than ordinary course collection matters which are neither against any of the
Transferors nor related to any Material Agreements; and
(c) There is no action, suit or proceeding pending or, to the
Knowledge of Comcast or the Transferors, threatened which questions the
legality, propriety or validity of the transactions contemplated hereby.
4.23. INSURANCE. The Transferors or their Affiliates maintain, with
---------
respect to the Business and the Assets, policies of fire and extended coverage
and casualty, liability and other forms of insurance, in such amounts and
against such risks and losses as are prudent for the operation of the Business
and shall take such actions as shall be necessary or appropriate (including
without limitation payment of all premiums and giving of all requisite notices
required by such policies) to maintain such insurance or comparable insurance in
full force and effect through the Closing Date.
4.24. [INTENTIONALLY OMITTED].
---------------------
4.25. TRANSACTIONS WITH AFFILIATES. (a) Schedule 4.25 lists and
----------------------------
describes all written agreements for the provision of services or products by
(x) the Transferors (excluding CREH, except with respect to the Irving Property)
to any of the Transferors' Affiliates or (y) any of the Transferors' Affiliates
to the Transferors (excluding CREH, except with respect to the Irving Property).
32
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(b) No oral agreements, including without limitation leases or
rights to use or occupancy, between or among any of the Transferors (excluding
CREH, except with respect to the Irving Property) and any of the Transferors'
Affiliates will survive the Closing.
4.26. [INTENTIONALLY OMITTED].
---------------------
4.27. PERSONNEL. Schedule 4.27 sets forth the names and position
---------
titles of each employee of the Transferors (other than CREH) whose Anticipated
1993 Compensation exceeds $50,000 and, as of the date of this Agreement, each
such employee's current annual salary and year to date commissions. As of the
date of this Agreement, no Transferor (other than CREH) has received notice from
any employee listed in Schedule 4.27 of his or her intention to resign or retire
from employment.
4.28. CUSTOMERS AND SUPPLIERS. Except as set forth in Schedule
-----------------------
4.28, since January 1, 1993 no Transferor has received any written notice of any
termination or cancellation of (or of any intent to terminate or cancel) its
business relationship with (y) any single customer or any group of affiliated
customers who represented one percent (1%) or more of the consolidated revenues
of the Business during the twelve month period ended December 31, 1992, or (z)
any single supplier or group of affiliated suppliers who provided one percent
(1%) or more of the requirements of the Business during the twelve month period
ended December 31, 1992.
4.29. [INTENTIONALLY OMITTED].
---------------------
4.30. SCA AGREEMENTS. (a) To the Knowledge of Comcast and each
--------------
Transferor, the SCA Lessors are licensed by the Federal Communications
Commission ("FCC") to conduct FM broadcast operations in the communities in
which they are broadcasting, and are operating their stations in conformity in
all material respects with the Communications Act of 1934, as amended (the
"Communications Act"), and Title 47 of the Code of Federal Regulations (the "FCC
Rules"). To the Knowledge of Comcast and each Transferor, each SCA Lessor is
licensed for a term expiring on the date which is not earlier than the
expiration date of the applicable SCA Agreement. Neither Comcast nor any
Transferor has Knowledge of any reason each such license should not be renewed
in the ordinary course.
(b) Except as described in Schedule 4.30, to the Knowledge of
Comcast and each Transferor, none of the SCA Lessors is a subject of any
investigation, notice of violation, order or complaint issued by or before any
Governmental Body, including the FCC, or of any other proceedings which could
threaten or adversely affect the validity or the continued effectiveness of the
FM radio station licenses held by the SCA Lessor.
33
<PAGE>
4.31. NO FINDER. None of Comcast, the Transferors or any party
---------
acting on their behalf has paid or become obligated to pay any fee or commission
to any broker, finder or intermediary for or on account of the transactions
contemplated hereby other than to Veronis, Suhler & Associates Inc., whose fees
and expenses, to the extent payable, shall be paid by Comcast.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to the Transferors that:
5.1. ORGANIZATION OF BUYER. (a) Buyer is a limited partnership
---------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full power and authority to own or lease and to
operate and use its properties and assets and to carry on its business as now
conducted.
(b) MLP Acquisition, L.P., a Delaware limited partnership ("MLP
Acquisition"), is the managing general partner of the Buyer and is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware.
(c) Music Holdings Corp., a Delaware corporation ("Music
Holdings"), is the sole general partner of MLP Acquisition and is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
5.2. AUTHORITY OF BUYER; NON-CONTRAVENTION. (a) Buyer has full
-------------------------------------
power and authority to execute, deliver and perform this Agreement and all the
Buyer Ancillary Agreements.
(b) The execution, delivery and performance hereof and the Buyer
Ancillary Agreements by Buyer have been duly authorized and approved by all
requisite partnership action. This Agreement has been duly authorized, executed
and delivered by Buyer and is the legal, valid and binding agreement of Buyer
enforceable (subject to bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application relating to or affecting creditors rights
and to general equity principles) in accordance with its terms, and each of the
Buyer Ancillary Agreements has been duly authorized by Buyer and upon execution
and delivery by Buyer will be a legal, valid and binding obligation of Buyer
enforceable (subject to bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application relating to or affecting creditors rights
and to general equity principles) in accordance with its terms.
(c) Except as set forth in Schedule 5.2(c), neither the execution
and delivery hereof or any of the Buyer Ancillary
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Agreements nor the consummation of any of the transactions contemplated hereby
or thereby nor compliance with or fulfillment of the terms, conditions and
provisions hereof or thereof will, with or without notice and/or the lapse of
time:
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under (A) the certificate or agreement of limited partnership of
Buyer, (B) any material note, instrument, agreement, mortgage, lease,
license, franchise, permit or other authorization, right, restriction or
obligation to which Buyer is a party or any of its properties is subject or
by which Buyer is bound, or (C) any Governmental Rule to which Buyer is a
party or by which it is bound which would result in a material adverse
effect on the business of Buyer taken as a whole; or
(ii) require the approval, consent, authorization or act of, or the
making by Buyer of any declaration, filing or registration with, (A) any
Governmental Body, except for required filings with the Federal Trade
Commission and the Department of Justice pursuant to HSR, or (B) any third
party except for the consent of Buyer's senior and subordinated lenders.
(d) Music Holdings has full power and authority to execute and
deliver this Agreement and all Buyer Ancillary Agreements on behalf of MLP
Acquisition and MLP Acquisition has full power and authority to execute and
deliver this Agreement and all Buyer Ancillary Agreements on behalf of Buyer and
Buyer has full power and authority to perform such agreements.
(e) The execution and delivery hereof by Music Holdings on behalf
of MLP Acquisition, and the execution and delivery hereof by MLP Acquisition on
behalf of Buyer, has been duly authorized and approved by all requisite
corporate action.
(f) Except as set forth in Schedule 5.2(f), neither the execution
and delivery hereof or any of the Buyer Ancillary Agreements nor the
consummation of any of the transactions contemplated hereby or thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will, with or without notice and/or the lapse of time:
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, (A) the certificate or agreement of limited partnership of
MLP Acquisition, (B) the certificate of incorporation of by-
35
<PAGE>
laws of Music Holdings, (C) any material note, instrument, agreement,
mortgage, lease, license, franchise, permit or other authorization, right,
restriction or obligation to which MLP Acquisition or Music Holdings is a
party or any of its properties is subject or by which MLP Acquisition or
Music Holdings is bound, (D) any Governmental Rule to which MLP Acquisition
or Music Holdings is a party or by which either is bound which would result
in a material adverse effect on either MLP Acquisition's or Music Holdings'
respective businesses taken as a whole, or (E) any Governmental Rule
affecting MLP Acquisition or Music Holdings if the result would be a
material adverse effect on MLP Acquisition's or Music Holdings' respective
businesses taken as a whole; or
(ii) require the approval, consent, authorization or act of, or the
making by MLP Acquisition or Music Holdings of any declaration, filing or
registration with, any Governmental Body, except for required filings with
the Federal Trade Commission and the Department of Justice pursuant to HSR,
or any third party.
5.3. PARTNERSHIP INTEREST. When issued, the Partnership Interest
--------------------
shall be duly authorized, validly issued and non-assessable.
5.4. FINANCING. Set forth on Schedule 5.4 is a true and correct
---------
copy of a financing commitment evidencing Buyer's financial ability to deliver
the Cash Consideration at the Closing (the "Commitment Letter").
5.5. FINANCIAL STATEMENTS. Schedule 5.5 contains the audited
--------------------
Balance Sheet of Buyer as of December 31, 1992 and the related audited Statement
of Operations and Statement of Cash Flows for the period ended December 31,
1992, and the Balance Sheet of Buyer as of September 30, 1993 and the related
unaudited Statement of Operations and Statement of Cash Flows for the period
ended September 30, 1993. Such financial statements present fairly, in all
material respects, the financial condition of Buyer as of December 31, 1992 and
September 30, 1993, respectively, and the results of Buyer's operations and cash
flows for the period ended December 31, 1992 and September 30, 1993,
respectively, all in conformity with GAAP on a consistent basis, subject in the
case of the September 30, 1993 Balance Sheet and related Statement of Operations
and Statement of Cash Flows to normal year end adjustments and the absence of
footnotes.
5.6. NO FINDER. Neither Buyer nor any party acting on its behalf
---------
has paid or become obligated to pay any fee or commission to any broker, finder
or intermediary for or on account of the transactions contemplated hereby other
than to
36
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Centre Partners whose fees and expenses, to the extent payable, shall be paid by
Buyer.
ARTICLE VI
ACTION PRIOR TO THE CLOSING DATE
--------------------------------
Between the date of this Agreement and the Closing Date:
6.1. INVESTIGATION BY THE PARTIES. (a) The Transferors and
----------------------------
Comcast shall afford to the officers, employees and authorized representatives
of Buyer (including independent public accountants, lenders (and their
attorneys), appraisers, attorneys, underwriters and other agents and
representatives) reasonable access, during normal business hours, to the
offices, properties, employees, books and business and financial records
(including computer files, retrieval programs and similar documentation) of
Comcast (to the extent related to the Business and not otherwise available from
the Transferors) and the Transferors to the extent Buyer deems desirable and
shall furnish to Buyer or its authorized representatives such additional
information concerning the Assets and the Business as shall be reasonably
requested, including all such information to enable Buyer or such
representatives to verify the accuracy of the representations and warranties of
Comcast and the Transferors contained herein, to verify that the covenants of
Comcast and the Transferors contained herein have been complied with and to
determine whether the conditions set forth in Article VIII have been satisfied.
(b) Comcast has caused an independent environmental consultant
chosen by Comcast at its sole discretion ("Comcast's Environmental Consultant")
to inspect and audit the Facilities set forth on Schedule 6.1(b), at a cost of
$26,100, for the existence of any and all violations of Environmental Laws (a
"Phase I Audit") and has delivered to Buyer the reports describing the findings
and conclusions of such Phase I Audits. In addition, Comcast has caused
Comcast's Environmental Consultant to conduct testing, sampling, analyses or
other processes (a "Phase II Audit") at the Buffalo Property and at the Facility
leased in Warren, Michigan, and shall, promptly after the conclusion of such
Phase II Audits, provide Buyer with the reports describing the findings and
conclusions of such Phase II Audits. If any of Buyer's lenders requests the
Buyer to cause Phase I or Phase II Audits to be conducted at any of the other
Facilities, Buyer shall have the right, subject to the consent of Comcast (which
consent shall not be unreasonably withheld), to cause an Environmental
Consultant chosen by Buyer in its sole discretion ("Buyer's Environmental
Consultant") to conduct such Phase I or Phase II Audits at any such Facilities.
Buyer shall, promptly after the conclusion of such Phase I or Phase II Audits,
37
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provide Comcast with the reports describing the findings and conclusions of such
Phase I or Phase II Audits. Access to conduct such Phase I and Phase II Audits
shall be afforded to Buyer and Buyer's Environmental Consultant by the
Transferors and Comcast upon receipt of reasonable advance notice and during
normal business hours and shall be had or done in such a manner so as not
unreasonably to interfere with the normal conduct of business of the Transferors
or Comcast. One-half of the cost and expenses of all Phase I and Phase II
Audits shall be borne by Buyer and one-half of the cost and expenses of all
Phase I and Phase II Audits shall be borne by Comcast.
(c) If the findings and conclusions of any Phase II Audit are
unsatisfactory to either Comcast or Buyer, in either such party's sole
discretion, then such unsatisfied party may elect to exclude from the Assets the
real property interest held by the Transferor of the Facility to which such
unsatisfactory Phase II Audit relates (the "Excluded Facility"). If such
election is made by Comcast or Buyer, then (i) such Excluded Facility shall no
longer constitute an Asset but shall be included in the Excluded Assets, (ii)
the applicable Transferor shall lease, rent free, or sublease for the rent and
other occupancy related charges of the tenant under the applicable overlease
(excluding extraordinary charges, including, without limitation, improvements
and capital expenditures), as applicable, such Excluded Facility to Buyer for
such period (terminable by Buyer) up to six months as Buyer may elect, and (iii)
if such election is made by Comcast, upon the termination of such lease or
sublease, as applicable, Comcast shall pay Buyer's reasonable moving costs and
expenses. Comcast and each Transferor agrees that any liabilities and
obligations arising under Environmental Laws with respect to such Excluded
Facilities, other than liabilities resulting from actions of Buyer while an
occupant of such Excluded Facilities, shall for all purposes of this Agreement
(including the indemnification by Comcast and the Transferors provided in
Article X) be treated as Excluded Liabilities.
(d) Buyer shall afford to the officers, employees and authorized
representatives of Comcast (including independent public accountants and
attorneys) reasonable access, during normal business hours, to the offices,
properties, employees, books and business and financial records (including
computer files, retrieval programs and similar documentation) of Buyer to the
extent Comcast deems desirable and shall furnish to Comcast such additional
information as shall be reasonably requested, including all such information to
enable Comcast or such representatives to verify the accuracy of the
representations and warranties of Buyer contained herein, to verify that the
covenants of Buyer contained herein have been complied with and to determine
whether the conditions set forth in Article IX have been satisfied.
38
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6.2. NOTICES. Each party shall promptly notify the other of any
-------
action, suit or proceeding, of which each party has Knowledge, that shall be
instituted or threatened against such party to restrain, prohibit or otherwise
challenge the legality of any transaction contemplated hereby. The Transferors
and Comcast shall promptly notify Buyer of any action, audit, lawsuit, claim,
proceeding or investigation that may be threatened, brought, asserted or
commenced against a Transferor or Comcast, of which such party has Knowledge,
which would have been listed in Schedule 4.22 if such action, audit, lawsuit,
claim, proceeding or investigation had arisen prior to the date hereof.
6.3. OTHER ACTION; CONSENTS OF THIRD PARTIES; GOVERNMENTAL
-----------------------------------------------------
APPROVALS. (a) Each party hereto shall use all reasonable efforts, and the
- ---------
other parties shall cooperate, promptly to cause the fulfillment at the earliest
practicable date of all the conditions to such party's obligations to consummate
the Transfer of the Assets under this Agreement and the other transactions
contemplated hereby (including, in the case of Buyer, fulfillment of the
conditions contained in the Commitment Letter). Comcast and the Transferors
shall use all reasonable efforts, and Buyer shall cooperate, promptly to (i)
obtain all consents, amendments or permits from third parties, including
Governmental Bodies, which are required by the terms thereof, hereby or
otherwise for due and punctual consummation by Buyer and the Transferors of the
transactions contemplated hereby, and (ii) obtain the Transfer of Environmental
Approvals to Buyer and to obtain all Environmental Approvals necessary for the
consummation of the transaction contemplated hereby.
(b) Comcast and the Transferors agree to expend such amounts of
money, if any, as they shall reasonably determine to be necessary in their
discretion in order to take the actions described in Section 6.3(a).
6.4. CONDUCT OF THE BUSINESS PRIOR TO THE CLOSING.
--------------------------------------------
(a) Comcast and the Transferors shall operate and carry on the Business only in
the ordinary course as currently operated. Consistent with the foregoing, unless
consented to in writing by Buyer, which consent shall not be unreasonably
withheld, Comcast and the Transferors shall comply with the provisions set forth
below:
(i) No Transferor shall enter into any contract, commitment or
other agreement (individually or in a series of related transactions by a
single Transferor) providing for payments by a Transferor in excess of
$20,000 over the term thereof;
(ii) The Transferors shall not, nor shall any of the Transferors
attempt to, sell or agree to sell or Transfer,
39
<PAGE>
or encumber, any interest in the Business or the Assets, except in the
ordinary course of business;
(iii) Comcast and the Transferors shall promptly notify Buyer in
writing of, and furnish to Buyer any information Buyer may request with
respect to, the occurrence of any event or the existence of any state of
facts known to Comcast or the Transferors that would result in Comcast's or
the Transferors' representations and warranties not being true in all
material respects if they were made at any time during the period from the
date hereof to the Closing;
(iv) Comcast and the Transferors shall use all reasonable efforts
to maintain and preserve the organization of the Business intact, to retain
the employees presently engaged in the Business (other than those employees
with respect to whom Buyer from time to time informs Comcast that Buyer
does not intend to employ immediately after the Closing Date) so that they
will be available to Buyer after the Closing (provided, however, that
-------- -------
nothing herein shall change at will relationships or preclude the
employer's rights thereunder) and to maintain its relationships in all
material respects with customers, suppliers and others so that those
relationships will be preserved through the Closing;
(v) The Transferors shall not grant or agree to grant any general
increase in the rates of salaries or comparable compensation (other than
pursuant to collective bargaining agreements in effect as of the date
hereof) of its employees or agents of the Business whose Anticipated 1993
Compensation in either case is at least $50,000;
(vi) The Transferors shall maintain the material Assets in
serviceable condition or in working order and, in either case, suitable for
use in accordance with the past practices of the Transferors;
(vii) No Transferor shall make any capital expenditures or
commitments therefor, additions or capital improvements in connection with
the Business in excess of $20,000 (individually or in a series of related
transactions) except in connection with Muzak National Account Agreements;
(viii) The Transferors shall pay all trade and other payables
consistent with their terms;
(ix) The Transferors shall not make any distribution or other
Transfer of their respective assets other than cash
40
<PAGE>
to any Transferor Group Member or Affiliate of the Transferors;
(x) The Transferors shall not enter into or amend any lease or
similar agreement under which a Transferor shall be lessee of, or hold or
operate, any real property owned by any Person; and
(xi) Comcast will maintain in full force and effect each employee
benefit plan (as defined in section 3(3) of ERISA) in which any employees
of the Transferors participate and will timely make all required
contributions thereto and will administer each such plan in accordance with
its terms and all applicable laws.
(b) Except as expressly contemplated hereby, the Transferors shall
not other than in the ordinary course:
(i) enter into any contract, agreement, undertaking or commitment
which, if in effect on the date hereof, would have been required to be set
forth in Schedules 4.19(a), 4.19(b); or
(ii) take any action described in Sections 4.5(b)(i) through (xv)
which, if taken between the March Balance Sheet Date and the date of this
Agreement, would have been required to be disclosed in Schedule 4.5(b)
pursuant to the terms of Section 4.5(b).
(c) Notwithstanding the foregoing provisions of this Section 6.4,
Comcast may charge any or all of the Transferors a management fee or fees in any
amount, provided that the obligations to pay such fees shall be Excluded
Liabilities, and provided further that any such management fees shall be paid on
or prior to the Closing Date.
6.5. ANTITRUST COMPLIANCE, ETC. As promptly as practicable after
--------------------------
the date of this Agreement, Buyer and the Transferors (or their ultimate parent
entities) shall file with the Federal Trade Commission and the Antitrust
Division of the Department of Justice the notifications and other information
required to be filed under HSR with respect to the transactions contemplated
hereby. The Buyer and the Transferors (or their ultimate parent entities) shall
file as promptly as practicable such additional information as may be requested.
Buyer, Comcast and the Transferors shall make available to the other such
information in their possession as may be necessary for the completion of the
notifications and other information to be filed by or on behalf of the other (or
their ultimate parent entities). Buyer (or its ultimate parent entity) shall
pay the filing fee required under HSR.
41
<PAGE>
6.6. SCA LESSORS. Comcast shall promptly notify Buyer if Comcast
-----------
or any Transferor receives written notice (i) that any SCA Lessor operates
stations not in conformity with the Communications Act and the FCC Rules, (ii)
of the assignment or license or transfer of control of the licenses of any of
the SCA Lessors, (iii) of any investigation, notice of violation, order or
complaint issued by or before any Governmental Body, including the FCC, with
respect to the SCA Lessors, and (iv) of any other proceedings that could
materially or adversely affect the validity or the continued effectiveness of
the FM radio station licenses held by the SCA Lessors.
6.7. EXON-FLORIO. None of the parties shall make a voluntary
-----------
filing under Section 721 of the Defense Production Act of 1950 with respect to
the transactions contemplated hereby without the consent of the Transferors, in
the case of Buyer, or Buyer, in the case of Transferors or Comcast.
6.8. TRANSFERORS' DISCLOSURE. Comcast and the Transferors may from
-----------------------
time to time prior to the Closing, by notice in accordance with this Agreement,
(x) supplement or amend any Schedule to this Agreement to correct any
representation and warranty herein contained that was not true when made or (y)
otherwise correct any such representation and warranty that is not made by
reference to a Schedule hereto (any such supplementation or amendment pursuant
to clause (x) or correction pursuant to clause (y) being referred to as a
"Disclosure"); provided, that, if any Disclosure is delivered to Buyer within
-------- ----
seven (7) business days of the then scheduled Closing Date, the Closing Date
and, if necessary, the Termination Date shall be extended for a period of seven
(7) business days after the date of such delivery. To the extent that a
Disclosure relates to a matter that occurred or existed at or prior to the date
of this Agreement, no such Disclosure shall be deemed to correct or to cure any
breach of such representation or warranty for purposes of Article VIII or XI,
and Buyer shall be entitled to terminate this Agreement pursuant to Section
11.1(c) in which event Comcast shall immediately reimburse Buyer for all of
Buyer's Expenses; provided, that for purposes of this Section 6.8, Buyer's
--------
Expenses shall not exceed $1,000,000. The Transferors and Buyer agree that, in
such event, Buyer's damages will not be readily ascertainable and, therefore,
that the reimbursement of Buyer's Expenses pursuant to the preceding sentence
shall be liquidated damages (and not a penalty) for the breach by Comcast or the
Transferors of such representation and warranty, and that such liquidated
damages shall be Buyer's sole remedy with respect to such breach; provided, that
--------
Buyer shall retain all of its rights and remedies with respect to any breach or
violation by Comcast or any Transferor of their obligations under Section 12.8.
To the extent that a Disclosure relates to a matter which occurs after the date
of this Agreement, Buyer shall be entitled to terminate this Agreement pursuant
to Section 11.1 (c), but Buyer
42
<PAGE>
shall not be entitled to exercise any of its rights and remedies hereunder,
except its rights and remedies with respect to any breach or violation by
Comcast or any Transferor of their obligations under Section 12.8. If the
Closing occurs, any such Disclosure will be effective to cure and correct for
all purposes any incorrectness or breach of any representation or warranty
(whether or not material) which would have existed by reason of Comcast or the
Transferors not having made such Disclosure. Notwithstanding the foregoing,
Comcast and the Transferors may prior to December 4, 1993, by notice in
accordance with this Agreement, supplement or amend Schedules 4.19(a)(i) and
(ii) and 4.19(b) and Schedule 4.3 solely as a result of amending 4.19(a) and
4.19(b), to correct any representation and warranty contained in Sections
4.19(a)(i) and (ii) and 4.19(b) and, if applicable, Section 4.3, respectively,
that was not true when made. For purposes of this Section 6.8, such supplements
or amendments shall be deemed to relate to a matter that occurred or existed at
or prior to the date of this Agreement.
ARTICLE VII
ADDITIONAL COVENANTS OF THE PARTIES
-----------------------------------
7.1. COVENANT NOT TO COMPETE. At the Closing Buyer, the
-----------------------
Transferors and Comcast shall enter into the Non-Competition Agreement in the
form attached as Exhibit A.
7.2. EXPENSES. Except as otherwise specifically provided in this
--------
Agreement, (a) Buyer, Comcast and the Transferors shall bear their own
respective expenses incurred in connection with this Agreement and in connection
with all obligations required to be performed by each of them under this
Agreement and (b) Comcast's and the Transferors' expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated
hereunder shall not be a liability on the Closing Date Balance Sheet.
7.3. PUBLICITY. Prior to the Closing, none of Buyer, Comcast or
---------
the Transferors shall publicize, advertise, announce or describe to any
Governmental Body or other third person the terms of this Agreement, the parties
hereto or the transactions contemplated hereby, except as may be required by law
or as required or permitted pursuant to this Agreement in order to obtain the
consent of any such third person or Governmental Body or to Buyer's partners,
lenders and their advisors or to any third party to enable Buyer, Comcast or the
Transferors to consummate the transactions contemplated hereunder. No press
release or other public announcement of any kind concerning the transactions
contemplated by this Agreement shall be made by Buyer, Comcast or the
Transferors except as counsel for any party advises is required by law or upon
prior written approval (as to form and content) of Buyer, in the case of Comcast
or the
43
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Transferors, and Comcast, in the case of Buyer. Notwithstanding the foregoing,
Buyer may disclose or publish any information as it may deem reasonably
necessary or appropriate (a) in order to comply with the Prior Asset Purchase
Agreement, (b) in connection with the refinancing of all or part of its debt,
(c) to its employees as may be required in connection with such employees'
duties or the anticipated duties of such employees after the Closing, or (d) in
connection with the preparation, filing and consummation of an offering of
securities under the Securities Act of 1933 or any exemption thereunder.
7.4. [INTENTIONALLY OMITTED].
---------------------
7.5. W-2 MATTERS. Comcast, the Transferors and Buyer agree that,
-----------
if the Closing occurs on any date other than December 31, 1993, pursuant to the
"Standard Procedure" provided in Section 4 of Revenue Procedure 84-77, 1984-2
Cumulative Bulletin 753, with respect to filing and furnishing IRS Forms W-2, W-
3, W-4, W-5 and 941 with respect to employees of the Transferors who become
employees of Buyer immediately after the Closing.
7.6. POST-CLOSING REMITTANCES. If, after the Closing Date, (a) the
------------------------
Transferors or Comcast or their Affiliates shall receive any remittance from any
account debtor with respect to any accounts or notes receivables included in the
Assets, the Transferors or Comcast or their Affiliates, as applicable, shall
endorse such remittance to the order of Buyer and forward it to Buyer promptly
following receipt thereof, or (b) Buyer or its Affiliates shall receive any
remittance from any account debtor not in payment of any accounts or notes
receivables included in the Assets, or not otherwise payable to Buyer, then
Buyer or its Affiliates shall endorse such remittance to the order of Comcast
and forward it to Comcast promptly following receipt thereof.
7.7. ACCESS TO RECORDS AFTER CLOSING. (a) For a period of three
-------------------------------
years after the Closing Date, Comcast shall afford Buyer and its representatives
reasonable access to all the books and records relating to the Assets or the
Business. Such access shall be afforded by Comcast upon receipt of reasonable
advance notice and during normal business hours and shall be had or done in such
a manner so as not to unreasonably interfere with the normal conduct of business
of Comcast. Buyer shall have the right, at its own expense, to make copies of
such records. Buyer shall be responsible for any out of pocket costs and
expenses reasonably incurred by Comcast or its Affiliates in retrieving such
books and records at Buyer's request. If Comcast shall desire to dispose of any
such books and records prior to the expiration of such three year period,
Comcast shall, prior to such disposition, give ninety (90) days' written notice
to Buyer, and Buyer shall have the right at its option and expense to segregate
and remove such books and records as Buyer may elect
44
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from those Comcast desires to dispose of within 180 days after the receipt of
such notice.
(b) For a period of three years after the Closing Date, Buyer
shall afford Comcast and its representatives reasonable access to all the books
and records relating to the Assets or the Business with respect to matters
arising on or prior to the Closing Date. Additionally, for a period of six (6)
years after the Closing Date, Buyer shall afford Comcast and its representatives
reasonable access to all the books and records relating to the Assets which
Buyer may retain after the Closing Date for matters directly related to (i) a
tax investigation or audit of Comcast or the Transferors or (ii) a Claim against
Comcast or the Transferors as described in Article X. Such access shall be
afforded by Buyer upon receipt of reasonable advance notice and during normal
business hours and shall be had or done in such a manner so as not to
unreasonably interfere with the normal conduct of business of Buyer. Comcast
shall have the right, at its own expense, to make copies of such records.
Comcast shall be responsible for any out of pocket costs and expenses reasonably
incurred by the Buyer or its Affiliates in retrieving such books and records at
Comcast's request. If Buyer shall desire to dispose of any of such books and
records prior to the expiration of such three-year or six-year period, Buyer
shall, prior to such disposition, give ninety (90) days' written notice to
Comcast, and Comcast shall have the right at its option and expense to segregate
and remove such books and records as Comcast may select from those Buyer desires
to dispose of within 180 days after the receipt of such notice.
7.8. COOPERATION IN LITIGATION AND TAXES. Subject to any more
-----------------------------------
specific provisions in Article X, each party shall provide the other with such
cooperation as may reasonably be requested, at the expense of the requesting
party, in connection with (a) the defense of any litigation relating to the
Business whether existing on the Closing Date or arising thereafter out of, or
relating to, an occurrence or event happening before the Closing Date and (b)
Taxes relating to the Business. Without limiting the generality of the
foregoing, if Comcast (on behalf of a Transferor) shall require the benefit of
any right, claim or cause of action referred to in Section 1.1(xii) in order to
defend any Claim pursuant to Section 10.6 or otherwise, Buyer shall Transfer it
to Comcast on terms reasonably acceptable to Buyer and Comcast or shall enforce
it for Comcast's benefit, in each case to the extent reasonably possible. If
Buyer enforces such Claim for the benefit of Comcast, Buyer shall be reimbursed
by Comcast for its reasonable out-of-pocket expenses in connection therewith.
7.9. FIRPTA. Comcast and each Transferor hereby represents that it
------
is not a foreign person within the meaning of Section 1445(b)(2) of the Code,
and at the Closing each
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Transferor shall deliver to Buyer a duly sworn affidavit affirming such
representation and setting forth such Transferor's taxpayer identification
number and such other information required by Section 1445(b)(2) of the Code and
the regulations thereunder.
7.10. INTELLECTUAL PROPERTY ASSIGNMENTS. At the Closing, the
---------------------------------
Transferors agree to execute the assignments to Buyer of the Transferors'
Proprietary Rights (the "Intellectual Property Assignment") in form and
substance reasonably satisfactory to Buyer and the Transferors, and for a period
of three (3) years thereafter Comcast agrees to execute such confirmatory
assignments as may be needed to record in the United States Patent, Trademark
and Copyright Offices the Transfer to Buyer of the Transferors' rights and
licenses in and to the Proprietary Rights.
7.11. CONFIDENTIALITY. Except as permitted or contemplated by this
---------------
Agreement or as required by law, Comcast and the Transferors shall and shall
cause each Transferor Group Member to treat and safeguard as confidential and
secret all Protected Information and neither Comcast nor any Transferor shall
use or disclose, furnish or make accessible to any person any Protected
Information, except as required by law or as permitted under this Agreement.
For purposes of this Section 7.11, the term "Protected Information" shall mean
trade secrets, confidential or proprietary information, knowledge, or know-how
pertaining primarily to the Business or any confidential or proprietary
information concerning any customer of the Business, including, without
limitation, customer lists, research and development information and materials,
inventions, formulas, methods, techniques, processes, plans, procedures,
contracts, financial information and computer models. For purposes of this
Section 7.11, confidential information shall not include any information which
is at the time of its disclosure by Comcast or a Transferor in the public domain
other than as a result of any breach by Comcast or a Transferor of this Section
7.11.
7.12. [INTENTIONALLY OMITTED].
---------------------
7.13. FURTHER ASSURANCES. Subject to Section 6.3(b), from time to
------------------
time following the Closing until the third anniversary thereof, the Transferors
and Comcast shall execute and deliver, or cause to be executed and delivered, to
Buyer such other instruments of Transfer as Buyer may request or as may be
otherwise necessary to more effectively Transfer to, and vest in, Buyer and put
Buyer in possession of, the Assets.
7.14. RIGHT OF ENDORSEMENT; POWER OF ATTORNEY. After the Closing,
---------------------------------------
Buyer shall have the right and authority to endorse, without recourse, the names
of the Transferors on any check or any other evidence of indebtedness received
by Buyer on account
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of any Asset, and the Transferors shall deliver to Buyer at the Closing copies
of such documents sufficient to permit Buyer to deposit such checks or other
evidences of indebtedness in bank accounts in the name of Buyer. In addition,
the Transferors shall constitute and appoint Buyer the true and lawful attorney
of the Transferors, with full power of substitution, in the name of the
Transferors or in the name of Buyer, for the benefit of Buyer, to collect,
assert or enforce any claim, right or title of any kind in or to the Assets, to
institute and prosecute all actions, suits and proceedings which Buyer may deem
proper in order to collect, assert or enforce any such claim, right or title, to
defend and compromise all actions, suits and proceedings in respect of any of
the Assets, and to do all such acts and things in relation thereto as Buyer
shall deem advisable. The Transferors acknowledge that such powers are coupled
with an interest and shall not be revocable by them in any manner or for any
reason, including, without limitation, the liquidation or dissolution of the
Transferors, and that Buyer shall be entitled to retain for its own account any
amounts collected pursuant to such powers, including any amounts payable as
interest in respect thereof. Such powers shall be granted by such powers of
attorney and other instruments as shall be reasonably requested by Buyer.
7.15. BULK SALES. Buyer, Comcast and the Transferors hereby waive
----------
compliance with the provisions of Article 6 of the Uniform Commercial Code as it
is in effect in the states where the Assets are located.
7.16. [INTENTIONALLY OMITTED].
---------------------
7.17. [INTENTIONALLY OMITTED].
---------------------
7.18. AMENDED PARTNERSHIP AGREEMENT. At the Closing, the
-----------------------------
Contributing Parties shall enter into, and Buyer shall cause MLP Acquisition to
enter into, on its own behalf and on behalf of the other Partners (as defined in
the Second Amended and Restated Partnership Agreement), an amended and restated
partnership agreement of Buyer (the "Second Amended and Restated Partnership
Agreement") in the form attached as Exhibit B (with such changes thereto as
Buyer's lenders may request in connection with the conversion of up to
$5,000,000 in loans into Units of Limited Partnership Interest (as defined in
the limited partnership agreement of Buyer) provided that such changes do not
materially adversely affect the Class C-1 Limited Partners (as defined in the
limited partnership agreement of Buyer), pursuant to which the Contributing
Parties shall be admitted to Buyer as Class C-1 Limited Partners and shall
receive the Partnership Interest.
7.19. NON-SOLICITATION. If the Closing does not occur, neither
----------------
Buyer on the one hand nor Comcast, the Transferors or any of their Affiliates on
the other hand shall, for a period of two years after the termination of this
Agreement, without the
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prior written approval of the other party, directly or indirectly solicit,
induce or attempt to persuade any Person who is an employee of such party or any
of its Affiliates on the date of this Agreement or at any time hereafter prior
to the end of such two-year period, to terminate his or her employment with such
party or its Affiliates. Without limiting the right of the parties to pursue
all other legal and equitable rights available for a violation of this Section
7.19, it is agreed that other remedies cannot fully compensate the non-breaching
party for such a violation and that such non-breaching party shall be entitled
to injunctive relief to prevent a violation or continuing violation hereof. It
is the intent and understanding of each party hereto that if, in any action
before any court or agency legally empowered to enforce this Section 7.19, any
term, restriction, covenant or promise in this Section 7.19 is found to be
unreasonable and for that reason unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such court or agency.
7.20. [INTENTIONALLY OMITTED].
---------------------
7.21. NO CONTEST. On and after the Closing Date, neither the
----------
Transferors nor Comcast shall directly or indirectly test the validity of any
Intellectual Property Right or disclose to any third party any Technical
Information which is proprietary in the form of a trade secret, except such
disclosure as may be required by Governmental Rule or as may be necessary to
comply with any obligations or enforce any rights under Article X.
7.22. SUBORDINATION AGREEMENT. At the Closing, Buyer, Comcast and
-----------------------
the Contributing Parties (and, if requested by any of Buyer's lenders, any one
or more of the other Transferors) shall execute and deliver to Buyer's lenders
party thereto an agreement of subordination (the "Subordination Agreement") in
form and substance acceptable to Buyer's lenders, provided that such
Subordination Agreement shall expressly permit payment to and the enforcement of
remedies of the Contributing Parties in respect of the Partnership Interest or
Class C-1 Exchange Notes (as defined in Exhibit B) on or after the eleventh
anniversary of the Closing Date.
7.23. MUZAK LICENSE AGREEMENTS. Buyer, as the licensor, hereby
------------------------
consents to the Transfer of the Muzak License Agreements to Buyer pursuant to
this Agreement and, effective at the Closing, hereby waives and releases the
Transferors from all claims of Buyer thereunder, past and present.
7.24. TRADENAMES LICENSE.
------------------
(a) Comcast hereby grants Buyer a non-exclusive, royalty free
license to use the tradenames "Comcast", "Comcare",
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"Comcast Sound", "Comcast Sound Communications" and "Comcast Financial Products"
(the "Tradenames") in connection with the operation of the Business for a period
of one (1) year (provided that such license may, to the extent necessary, exceed
one year in connection with the provisions of Section 7.24(d)) commencing on the
Closing Date; provided, however, that this license shall expire with respect to
-------- -------
the use of the Tradenames on buildings, vehicles and inventory (other than as
provided below) ninety (90) days after the Closing Date. Notwithstanding the
preceding sentence, this license does not grant Buyer the right to use the
Tradenames on any invoices, letterhead or other materials mailed or otherwise
delivered to subscribers of the Business (whether or not such materials are
included in the Assets). The Tradenames shall only be used in the manner and
style in which they are currently being employed. No other use of the
Tradenames shall be made without the prior written approval of Comcast.
(b) On or before the expiration of this license, Buyer shall
discontinue all use of the Tradenames and shall thereafter only use tradenames
or trademarks not confusingly similar to the Tradenames.
(c) Buyer acknowledges that, subject to the provisions of this
license, Comcast holds all right, title and interest in the Tradenames, and
agrees that Buyer's use does not create any independent rights in the
Tradenames.
(d) Buyer agrees to cause subscriber installed equipment bearing
any of the Tradenames to be replaced with equipment not bearing the Tradenames
or to otherwise cause the Tradenames to be removed from such equipment, or
concealed, at the time Buyer makes its first service call after the Closing to
the subscriber location where such equipment is located.
(e) Notwithstanding any other portion of this Section 7.24, Buyer
agrees that no billing statement to subscribers of the Business after the
Closing will contain any use of the Tradenames.
7.25. TRANSITION. (a) Within ten (10) business days following
invoice therefor, Buyer shall pay Comcast the Transition Costs (as hereinafter
defined) for the period of time commencing on the day following the Closing Date
through March 31, 1993 (the "Transition Period"). Comcast may render an invoice
for the Transition Costs at any time following the Transition Period. If
payment in full of such invoice is not made within such ten (10) business day
period, interest shall be payable thereon for the period of time from the day
following the end of such ten (10) business day period until the day paid at the
Default Rate (as defined in the Philadelphia Sublease). During the Transition
Period, Buyer shall have access to the premises which are the subject of the
Philadelphia Sublease and
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shall have the authority to assign work to Designated Persons (as hereinafter
defined) which is reasonably within such Designated Persons job description.
The Designated Persons shall not be employees of Buyer. Comcast shall cooperate
with Buyer with respect to such assignment of work.
(b) The term "Transition Costs" shall mean the sum of (i) one-half
of the amount paid during, or payable in respect of, the Transition Period on
account of salary continuation to persons designated by Buyer who were employees
of the Transferors prior the Closing Date and who are providing services to the
Transferors and Buyer following the Closing Date (the "Designated Persons");
plus (ii) one-half of the cost of providing continued health and welfare
benefits to Designated Persons during the Transition Period based on "COBRA"
costs for such benefits; plus (iii) $3,865.50 per month during the Transition
Period; plus (iv) all long distance telephone charges associated with services
provided by Designated Persons to Buyer during the Transition Period.
(c) If the Closing occurs after December 31, 1993, Buyer is hereby
granted the option to require Comcast to enter into the Philadelphia Sublease
for the period commencing April 1, 1994 and ending on April 30, 1994. To
exercise such option, Buyer must provide Comcast written notice of such exercise
prior to March 21, 1994. If Buyer exercises such option, Comcast shall obtain
and provide Buyer with a copy of any consent required in connection with such
sublease prior to April 1, 1994.
7.26. EMPLOYEE BENEFITS. (a) From and after the Closing Date,
-----------------
Comcast shall make and/or cause each employee benefit plan (as defined in
Section 3(3) of ERISA) to make all payments due to and satisfy all liabilities
and obligations (including without limitation the liabilities and obligations
arising under the agreements set forth in Schedule 4.18(g)) with respect to each
employee of the Transferors who shall immediately after the Closing Date become
an employee of Buyer in accordance with the terms of each such plan and all
applicable laws, including without limitation Section 601 of ERISA and Section
4980(f) of the Code.
(b) Within 60 days after the Closing Date, Comcast or the
Transferors shall pay to each employee of a Transferor who participates in the
plan described in Section 4.18(m) and who shall immediately after the Closing
Date become an employee of Buyer, the full account balance of such employee
(including earnings thereon through the Closing Date in accordance with the
terms of such plan).
7.27. PROPERTY LIENS. If, subsequent to the Closing Date, any
--------------
mechanic's or other lien, charge or order for the payment of money shall be
filed against the Properties or any
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portion thereof or against the Buyer or the Buyer's assigns, based upon any act
or omission or alleged act or omission on or before the Closing Date of Comcast,
the Transferors, their respective agents, servants or employees, or any
contractor, subcontractor or materialman connected with the construction of
improvements at the Properties, or repairs made to the Properties (whether or
not such lien, charge or order shall be valid or enforceable as such), within
ten (10) days after notice to Comcast of the filing thereof, Comcast or the
Transferors shall take such action, by bonding, deposit, payment or otherwise,
as will remove or satisfy such lien of record against the Properties.
7.28. DISCHARGE OF CERTAIN ENCUMBRANCES. (a) On or prior to the
---------------------------------
Closing Date, Comcast or the Transferors shall cause the mortgage on the Buffalo
Property to be paid and discharged of record unless the mortgagee under such
mortgage elects not to be paid by Comcast or the Transferors on or prior to such
date.
(b) Comcast and the Transferors shall use their best efforts to
cause UCC-3 Termination Statements to be filed in respect of each UCC-1
Financing Statement set forth in Schedule 4.13, and Comcast shall furnish Buyer
with evidence of the termination or ability to terminate any Encumbrance
perfected or purported to be perfected by the secured party named in such
UCC-1s, which evidence shall be satisfactory to Buyer's lenders.
7.29. REORGANIZATION. (a) At its election, Comcast may cause one
--------------
or more of the Transferors (other than a Contributing Party) to be merged into
Comcast Sound Communications, Inc., a Delaware corporation ("Comcast Delaware"),
or Comcast, no later than five days prior to the Closing Date, with Comcast
Delaware or Comcast, as the case may be, being the surviving corporation. If
Comcast shall make such election, Comcast shall keep Buyer fully informed with
respect to the status of such mergers. To the extent that any such merger shall
become effective prior to the Closing Date, all references herein to the merged
entity shall be deemed references to Comcast or Comcast Delaware, as the case
may be.
(b) Prior to the Closing Date, Comcast shall cause the Partnership
to be terminated and dissolved and the Assets held by the Partnership to be
conveyed and distributed as follows:
(i) all such Assets which are related to the Business conducted in
Peoria, Illinois shall be conveyed to Comcast Sound Communications, Inc.,
an Illinois corporation, and
(ii) the remaining such Assets shall be conveyed to Comcast Sound
Communications, Inc., an Indiana corporation.
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Upon termination and dissolution of the Partnership, and distribution of the
Assets held by it, as provided herein, Comcast Sound Communications, Inc., an
Illinois corporation, shall become a "Contributing Party" in lieu of the
Partnership.
(c) All costs and expenses related to any of the transactions
referred to in this Section 7.29 (including without limitation any Taxes) shall
be borne by Comcast.
7.30. ADDITIONAL ISSUANCES. In the event Buyer shall issue any
--------------------
Units of Partner Interest (as defined in the limited partnership agreement of
Buyer) from the date hereof through the Closing Date (including Units issued
upon the exercise of any Performance Options (as defined in the limited
partnership agreement of Buyer), on the Closing Date, the Class C-1
Participation Amount (as defined in Exhibit B hereto) shall be recalculated by
including within the definition of "Closing Day Units" (as defined in Exhibit B
hereto) the number of Units so issued.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
--------------------------------------------
The obligations of Buyer to consummate the transactions contemplated
hereby shall be subject to the satisfaction, on or prior to the Closing Date of
the following conditions (any or all of which may be waived by Buyer):
8.1. NO MISREPRESENTATIONS OR BREACH OF COVENANTS. There shall
--------------------------------------------
have been no material breach by the Transferors or Comcast in the performance of
any of their covenants and agreements herein required to be performed by the
Transferors or Comcast in whole or in part on or prior to the Closing Date which
shall not have been remedied or cured prior to the Closing Date; each of the
representations and warranties of Comcast and the Transferors contained herein
shall in all material respects be true and correct on the Closing Date as though
made on the Closing Date (subject to Section 6.8 and except (i) to the extent
that they expressly relate to an earlier date or (ii) as expressly contemplated
by or for changes permitted by this Agreement); and there shall have been
delivered to Buyer certificates to such effect, dated the Closing Date, signed
by F. Jerome Purcell and a senior vice president of Comcast.
8.2. NO MATERIAL ADVERSE CHANGE. Between the date of this
--------------------------
Agreement and the Closing Date, except for any change in general economic
conditions, there shall have been no material adverse change in the Assets taken
as a whole, the Business or the operations or financial condition of the
Transferors; and there shall have been delivered to Buyer certificates to such
52
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effect, dated the Closing Date, signed by F. Jerome Purcell and a senior vice
president of Comcast.
8.3. AUTHORIZING ACTION. Comcast and the Transferors shall have
------------------
taken all corporate or partnership action necessary to approve the transactions
contemplated hereby.
8.4. NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
----------------------------------------
investigation or inquiry or other proceeding by any Governmental Body shall have
been instituted and be pending, or Governmental Rule issued, preventing the
consummation of the transactions contemplated by this Agreement or which
materially and adversely affects this Agreement or the rights of the parties
hereunder or which questions the validity or legality of the transactions
contemplated hereby.
8.5. NO INJUNCTION. There shall be no effective injunction, writ,
-------------
preliminary restraining order or any order of any nature issued by a court of
competent jurisdiction directing that the transactions provided for herein or
any of them not be consummated as so provided.
8.6. NECESSARY GOVERNMENTAL APPROVALS. Buyer shall have received
--------------------------------
all approvals and actions of or by all Governmental Bodies which are necessary
to consummate the transactions contemplated hereby (including expiration or
termination of the applicable waiting period under HSR).
8.7. RELEASE OF ENCUMBRANCES. Any and all documents necessary to
-----------------------
procure the release of any Encumbrance (other than Permitted Encumbrances and
the Encumbrance perfected or purported to be perfected by the UCC-1 Financing
Statement set forth in the attachment to Item 2 of Schedule 4.22) on the Assets,
including any Encumbrances securing a Transferor's obligations for borrowed
money, shall have been delivered to Buyer.
8.8. CONSENTS. Comcast and the Transferors shall have delivered,
--------
or caused to be delivered, all consents, waivers or approvals relating to the
Transfer to Buyer of the Material Agreements (other than "Muzak National Account
Agreements"), Material Proprietary Rights and Governmental Permits.
8.9. DELIVERIES. (a) Comcast and the Transferors shall have
----------
executed and delivered to Buyer (i) Instruments of Assignment, including but not
limited to the Bill of Sale and the Assignment, Transferring to Buyer all of the
Assets to be Transferred at the Closing in accordance with the applicable
provisions of this Agreement, (ii) the Non-Competition Agreement and (iii) all
other documents required hereby to be delivered by Comcast and the Transferors
on or before the Closing Date and (b) the Contributing Parties shall have
executed and delivered to Buyer the Second Amended and Restated Partnership
Agreement.
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8.10. FINANCING. Buyer shall have received the proceeds of loans on
---------
terms not less favorable to Buyer in any material respect than those contained
in the Commitment Letter.
8.11. CERTIFICATES. The Transferors shall have furnished Buyer with
------------
such certificates to evidence compliance with the conditions set forth in this
Article VIII.
8.12. OPINION OF COUNSEL. Buyer shall have been furnished with the
------------------
opinion of Arthur R. Block, Deputy General Counsel of Comcast, substantially in
the form of Exhibit C, which opinion shall be addressed to Buyer's lenders (in
addition to Buyer) or state that it may be relied on by Buyer's lenders, as may
be requested by such lenders.
8.13. SUBORDINATION AGREEMENT. Comcast and the Contributing Parties
-----------------------
(and, if requested by any of Buyer's lenders, any one or more of the other
Transferors) shall have executed and delivered the Subordination Agreement to
Buyer and Buyer's lenders party thereto.
8.14. ESTOPPEL CERTIFICATES. Subject to Section 6.3(b), Comcast and
---------------------
the Transferors shall have delivered, or caused to be delivered, (a) an estoppel
certificate for each lease identified on Schedule 4.11, executed by the lessor,
identifying the lease and stating that such lease is in full force and effect,
that the applicable Transferor is current in all its obligations under such
lease and that the lessor is not aware of any default by such Transferor under
such lease and providing an agreement from the lessor that it will pay to Buyer
any deposit made pursuant to the lease in accordance with the terms and
conditions of the lease, and (b) an estoppel certificate executed by the holder
of the mortgage identified on Schedule 4.10(b) encumbering the Peoria Property
(and if the mortgage on the Buffalo Property has not been prepaid on or prior to
the Closing Date, an estoppel certificate executed by the holder of the mortgage
on the Buffalo Property), in each case setting forth the outstanding balance of
principal and interest due thereunder through the Closing Date and stating that,
as of the Closing Date, there are no defaults, or events which with the giving
of notice or passage of time or both or neither would constitute a default,
under such mortgage.
8.15. TITLE INSURANCE. Buyer shall have obtained title insurance
---------------
policies insuring fee simple title to the Properties in form and substance
acceptable to Buyer and issued by a title insurance company acceptable to Buyer
at its ordinary rates and without special premiums.
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ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS
OF COMCAST AND THE TRANSFERORS
--------------------------------
The obligations of Comcast and the Transferors to consummate the
transactions contemplated hereby shall, at the option of Comcast, be subject to
the satisfaction, on or prior to the Closing Date of the following conditions
(any or all of which may be waived by Comcast):
9.1. NO MISREPRESENTATION OR BREACH OF COVENANTS. There shall have
-------------------------------------------
been no breach by Buyer in the performance in any material respect of any of its
covenants and agreements herein required to be performed by Buyer in whole or in
part on or prior to the Closing Date which shall not have been remedied or cured
prior to the Closing Date; each of the representations and warranties of Buyer
contained herein (other than the representations and warranties contained in
Section 5.5) shall in all material respects be true and correct on the Closing
Date as though made on the Closing Date (except (i) to the extent that they
expressly relate to an earlier date or (ii) as expressly contemplated by or for
changes permitted by this Agreement); and there shall have been delivered to
Comcast a certificate to such effect, dated the Closing Date signed by the
President or any Vice President of Music Holdings.
9.2. AUTHORIZING ACTION. Buyer shall have taken all partnership
------------------
action necessary to approve the transactions contemplated hereby.
9.3. NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
----------------------------------------
investigation, inquiry or other proceeding by any Governmental Body shall have
been instituted and be pending, or Governmental Rule issued, preventing the
consummation of the transactions contemplated by this Agreement or which
materially and adversely affects this Agreement or the rights of the parties
hereunder or which questions the validity or legality of the transactions
contemplated hereby.
9.4. NO INJUNCTION. There shall be no effective injunction, writ,
-------------
preliminary restraining order or any order of any nature issued by a court of
competent jurisdiction directing that the transactions provided for herein or
any of them not be consummated as so provided.
9.5. DELIVERIES. Buyer shall have executed and delivered to the
----------
Transferors the Assumption and such other instruments of assumption as may be
reasonably requested by the Transferors and all other documents required hereby
to be delivered by Buyer on or before the Closing Date.
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9.6. NECESSARY GOVERNMENTAL APPROVALS. The Transferors shall have
--------------------------------
received all approvals and actions of or by all Governmental Bodies which are
necessary to consummate the transactions contemplated hereby (including
expiration or termination of the applicable waiting period under HSR).
9.7. CERTIFICATES. Buyer shall have furnished the Transferors with
------------
certificates evidencing compliance with the conditions set forth in this Article
IX.
9.8. OPINION OF COUNSEL. Comcast shall have been furnished with an
------------------
opinion of Rosenman & Colin, substantially in the form attached as Exhibit D.
9.9. TERMS OF DEBT FINANCING. The terms of the financing for the
-----------------------
transactions contemplated by this Agreement shall not be in conflict with the
rights of the Contributing Parties in respect of the Partnership Interest and
the Exchange Notes.
9.10. SUBORDINATION AGREEMENT. Buyer and Buyer's lenders shall have
-----------------------
executed and delivered the Subordination Agreement to Comcast and the
Transferors party thereto.
ARTICLE X
INDEMNIFICATION
---------------
10.1. SURVIVAL OF INDEMNIFICATION. The indemnification provided
---------------------------
for in Sections 10.2 and 10.3 shall terminate one year after the Closing Date
(and no claims shall be made by any Indemnitee thereafter) except that the
indemnification shall continue as to:
(a) (i) the representations and warranties contained in Sections
4.1, 4.2(b) and (c) , 4.3, 5.1 and 5.2 and the second sentence of Section
4.13 without limitation and (ii) the representations and warranties
contained in Sections 4.7 and 4.17 for the applicable statute of
limitations period;
(b) each covenant of any party hereto set forth herein or in any
Buyer Ancillary Agreement or Transferor Ancillary Agreement (in each case
excluding the Second Amended and Restated Partnership Agreement), until the
earliest to occur of (A) ninety (90) days after the expiration of the time
period during which such covenant or agreement is by its terms performable
by the party obligated by such covenant or agreement, (B) the third
anniversary of the Closing Date and (C) the expiration of any applicable
statute of limitations;
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(c) the failure of Comcast or the Transferors to pay, perform or
discharge any of the Excluded Liabilities in accordance with the terms
thereof or the failure of Buyer to pay, perform or discharge any of the
Assumed Liabilities in accordance with the terms thereof, as the case may
be, until the expiration of any applicable statute of limitations; and
(d) any claim for indemnification as to which an Indemnitee has
given notice to an Indemnitor in accordance with this Article X on or prior
to the date on which the period for indemnification would otherwise
terminate in accordance with this Section 10.1 until the liability of the
Indemnitor shall have been determined pursuant to this Article X and the
Indemnitor shall have reimbursed all Indemnitees the full amount required
to be indemnified pursuant to this Article X.
10.2. INDEMNIFICATION BY COMCAST AND THE TRANSFERORS. Comcast and
----------------------------------------------
the Transferors, jointly and severally, shall indemnify and hold harmless each
Buyer Group Member from and against any and all losses, obligations,
liabilities, settlement payments, awards, judgments, fines, penalties, damages,
deficiencies and reasonable expenses and costs, including reasonable attorneys'
fees (and any reasonable expert's fees) and court costs (collectively,
"Damages") incurred by such Buyer Group Member arising from:
(a) any breach, or failure to perform, by Comcast or the
Transferors of any of their covenants or other obligations herein or in any
Transferor Ancillary Agreement;
(b) any breach of any representation or warranty of Comcast or the
Transferors contained or referred to herein or any schedule, certificate,
exhibit or other instrument delivered by or on behalf of Comcast or the
Transferors pursuant hereto; or
(c) any failure of Comcast or the Transferors to pay, perform or
discharge any of (i) the Excluded Liabilities in accordance with the terms
thereof or (ii) the obligations of Comcast or the Transferors under the
contracts or other agreements relating to such Excluded Liabilities,
whether or not disclosed in this Agreement or in any Schedule or Exhibit
hereto;
provided, that, in calculating Damages, there shall be deducted the net amount
- -------- ----
of any actual insurance recovery in respect thereof (and the Indemnitee shall in
good faith use reasonable efforts to obtain such recovery and no right of
subrogation shall be permitted to accrue hereunder to any insurer).
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10.3. INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold
------------------------
harmless each Transferor Group Member from and against any and all Damages
(subject to the proviso with respect to the calculation thereof at the end of
Section 10.2) incurred by such Transferor Group Member arising from:
(a) any breach, or failure to perform, by Buyer of any of its
covenants or other obligations herein or in any Buyer Ancillary Agreement;
(b) any breach of any representation or warranty of Buyer
contained or referred to herein or in any schedule, certificate, exhibit or
other instrument delivered by or on behalf of Buyer pursuant hereto;
(c) any failure of Buyer to pay, perform or discharge any of (i)
the Assumed Liabilities in accordance with the terms thereof or (ii) the
obligations of Buyer under the contracts or other agreements relating to
such Assumed Liabilities; or
(d) any action of Buyer that causes liability under, or associated
with, the Warn Act to be assessed or otherwise imputed to Transferor.
10.4. LIMITATION ON AMOUNT OF INDEMNIFICATION. Notwithstanding
---------------------------------------
anything to the contrary set forth in this Article X, (a) other than Damages
arising from (i) a breach, or failure to perform, by Comcast or a Transferor of
any of their respective covenants pursuant to Sections 1.7, 2.4(d), 7.26, 7.27,
7.28 or 7.29 or the Non-Competition Agreement, (ii) the breach of any
representation or warranty of Comcast or a Transferor contained in Sections
4.2(b), 4.2(c), 4.3, 4.7(a), 4.17, 4.18 or 4.25, or (iii) the failure of a
Transferor or Comcast to pay, perform and discharge any of the Excluded
Liabilities, no Buyer Group Member shall be entitled to indemnification until
the aggregate amount of Damages payable to Buyer Group Members (without giving
effect to this limitation) exceeds $162,000; provided, that, if the aggregate
-------- ----
amount of such Damages exceeds $162,000, indemnification shall be made to the
full extent of any such Damages, (b) no Buyer Group Member shall be entitled to
indemnification to the extent that the amount of such indemnification, together
with the amounts of indemnification theretofore and concurrently made to all
Buyer Group Members in the aggregate, would exceed $16,200,000; provided, that,
-------- ----
such limitation shall not apply to a breach by Comcast or any Transferor of its
obligations under the Non-Competition Agreement, and (c) no Seller Group Member
shall be entitled to any indemnification for a breach of the representation or
warranty of Buyer contained in Section 5.5 in excess of $5,000,000 in the
aggregate.
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10.5. NOTICE OF CLAIMS. Any Buyer Group Member or Transferor Group
----------------
Member ("Indemnitee") seeking indemnification hereunder shall give to the party
or parties obligated to provide indemnification to such Indemnitee
("Indemnitor") a notice ("Claim Notice") describing in reasonable detail the
facts giving rise to any claim for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of computation of
the amount of such claim, and a reference to the provision of this Agreement or
any other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based.
10.6. THIRD PARTY CLAIMS. In the event of any third party claim,
------------------
deficiency or demand asserted or any action commenced or notice given of any
audit, administrative or other proceeding against an Indemnitee ("Claim") as to
which indemnification may be sought from an Indemnitor, the Indemnitee shall
promptly deliver a Claim Notice to the Indemnitor; provided, however, that the
-------- -------
failure by the Indemnitee to give such prompt notice shall not release the
Indemnitor of its indemnification obligations hereunder, except to the extent
such failure prejudices the Indemnitor. The Indemnitor shall be entitled to
participate in and assume the defense of any Claim if the Indemnitor shall
agree in writing within 15 days after receipt of such Claim Notice that it is
required, pursuant to this Article X, to indemnify the Indemnitee for such Claim
(the "Claim Acknowledgement Procedure"), provided, that, Indemnitor's compliance
-------- ----
with the Claim Acknowledgement Procedure shall not preclude the Indemnitor from
exercising any right it may otherwise have hereunder or under any Buyer
Ancillary Agreement or Transferor Ancillary Agreement against the Indemnitee.
If the Indemnitor assumes the defense of any such Claim, the Indemnitee shall
cooperate with the Indemnitor in connection therewith, and the Indemnitee shall
be kept informed with respect to, and shall have the right to participate, at
its expense, in, the contest, defense, settlement or compromise of any such
Claim. If the Indemnitor does not assume the defense of any such Claim or does
not comply with the Claim Acknowledgement Procedure, the Indemnitee shall be
entitled to conduct the defense of such Claim at Indemnitor's expense. In any
case, neither the Indemnitor nor the Indemnitee shall settle or compromise any
such Claim without the prior written consent of the other party or parties, as
the case may be, which consent shall not be unreasonably withheld or delayed.
10.7. RECOVERY OF CERTAIN DAMAGES. Notwithstanding the other
---------------------------
provisions of this Article X, no Buyer Group Member other than Buyer (and its
permitted assigns, including its lenders) shall have the right to recover
Damages pursuant to Section 10.2 except in connection with a third party claim
made directly against such Buyer Group Member and then only to the extent of its
direct out-of-pocket costs and expenses of defense,
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settlement or judgment (it being intended that no Buyer Group Member, other than
Buyer (and its permitted assigns, including its lenders), shall have the right
to recover damages in such circumstances based on alleged or actual reduction of
value of its interest in Buyer as a result of any claim for indemnification
under Section 10.2).
10.8. CERTAIN ADJUSTMENTS. (a) Any payment required to be made by
-------------------
an Indemnitor pursuant to Section 10.2 shall be deemed to be, and shall be
treated by the parties for tax purposes as, an adjustment to the Cash
Consideration (to the extent it relates to the Assets acquired therefor) or as a
capital contribution to Buyer (to the extent it relates to the Assets
contributed by the Contributing Parties).
(b) Any payment to which Buyer shall be entitled pursuant to this
Article X may at Buyer's option be setoff (x) against any cash or property
distributable in respect of the Partnership Interest and/or (y) against the
amount of any principal or interest payable on the Exchange Notes at the time
when such principal or interest is payable.
10.9. EXCLUSIVE REMEDY. Except as provided in Section 7.19 or for
----------------
the availability of other injunctive relief, if the Closing occurs, this Article
X shall be the exclusive remedy for breach or failure of any party referred to
in Sections 10.2 or 10.3, and no party shall make any claim hereunder other than
pursuant to the terms of this Article X.
10.10. MITIGATION. Buyer agrees that in the event the Transferors
----------
have not obtained the consent of any third party to the Transfer of any Material
Agreement or Material Proprietary Right to Buyer at Closing, and Buyer
nevertheless waives its closing condition with respect to such missing consent,
Buyer shall use all reasonable efforts to mitigate any Damages arising with
respect to such missing consent.
ARTICLE XI
TERMINATION
-----------
11.1. TERMINATION. This Agreement may be terminated at any time
-----------
prior to the Closing Date only: (a) by the mutual consent of Buyer and Comcast;
(b) by either Buyer, if any of its conditions to Closing contained in Article
VIII, or by Comcast or the Transferors, if any of their conditions to Closing
contained in Article IX, respectively, have not been fulfilled or waived on or
before January 31, 1994 (the "Termination Date"), (c) by Buyer, if there has
been a material misrepresentation or material breach of warranty in the
representations and warranties of Comcast or the Transferors or a material
breach by Comcast or the Transferors of any of their covenants or agreements
contained
60
<PAGE>
herein which shall not have been remedied or cured prior to the Closing Date; or
(d) by Comcast or the Transferors, if there has been a material
misrepresentation or material breach of warranty in the representations and
warranties of Buyer or a material breach by Buyer of any of its covenants or
agreements contained herein which shall not have been remedied or cured prior to
the Closing Date.
11.2. EFFECT OF TERMINATION. If this Agreement shall be terminated
---------------------
pursuant to Section 11.1 or otherwise pursuant to law, then in addition to the
rights under Section 12.8, the parties shall, subject to the provisions of
Section 6.8, have all rights which they may have under law or in equity.
ARTICLE XII
GENERAL PROVISIONS
------------------
12.1. SUCCESSORS AND ASSIGNS, PARTIES, ETC. (a) No assignment of
-------------------------------------
this Agreement or of any rights or obligations hereunder may be made by any
party (by operation of law or otherwise) without the prior written consent of
the others and any attempted assignment without the required consent shall be
void; provided, however, that Buyer may assign its rights under this Agreement
-------- -------
to any of its lenders, it being agreed and acknowledged by the parties that no
such assignment shall have the effect of increasing the obligations of Comcast
or the Transferors pursuant to this Agreement or giving any assignee any rights
or claims against Comcast or the Transferors which would be more favorable than
any Buyer Group Member would have had against Comcast or the Transferors had the
corresponding assignment not taken place.
(b) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their successors and permitted assigns. Nothing
herein, expressed or implied, is intended or shall be construed to confer upon
any Person, including any employee or dependent thereof, other than the parties
and successors and assigns permitted by this Section 12.1 and the other Buyer
Group Members and Transferor Group Members as stated herein, any right, remedy
or claim under or by reason hereof.
12.2. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits
----------------------------
and Schedules referred to herein and the documents delivered pursuant hereto
contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior agreements,
understandings or letters of intent between or among any of the parties
hereto, including the letter of intent (the "Letter of Intent") dated August 19,
1993 between Comcast and Buyer. This Agreement shall not be amended, modified
or supplemented except
61
<PAGE>
by a written instrument signed by an authorized representative of each of the
parties hereto.
12.3. WAIVERS. Any term or provision hereof may be waived, or the
-------
time for its performance may be extended, by the party or parties entitled to
the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes hereof if, as to any party, it is authorized in
writing by an authorized representative of such party. The failure of any party
hereto to enforce at any time any provision hereof shall not be construed to be
a waiver of such provision, nor in any way to affect the validity hereof or any
part hereof or the right of any party thereafter to enforce each and every such
provision. No waiver of any breach hereof shall be held to constitute a waiver
of any other or subsequent breach.
12.4. NOTICES. All notices or other communications required or
-------
permitted hereunder shall be in writing and shall be deemed given or delivered
(i) when delivered personally or by private courier, (ii) when actually
delivered by registered or certified United States mail or (iii) when sent by
telecopy (provided, that, it is confirmed by a means specified in clause (i) or
(ii)), addressed as follows:
If to Buyer, to:
Muzak Limited Partnership
400 North 34th Street
Suite 200
Seattle, Washington
Attention: John R. Jester
Telecopier: (206) 633-6210
Telephone Confirmation: (206) 633-3000
With a copy to:
Rosenman & Colin
575 Madison Avenue
New York, New York 10022
Attention: Michael Roth, Esq.
Telecopier: (212) 940-8776
Telephone Confirmation (212) 940-8800
If to Comcast or the Transferors, to:
Comcast Corporation
1234 Market Street
Philadelphia, Pennsylvania 19107
Attention: General Counsel
Telecopier: (215) 981-7794
Telephone Confirmation: (215) 665-1700
62
<PAGE>
or to such other address as such party may indicate by a notice delivered to
the other party hereto.
12.5. PARTIAL INVALIDITY. Wherever possible, each provision hereof
------------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
12.6. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
-------------------------
one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties hereto and delivered to each of Comcast, the Transferors and Buyer.
12.7. GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of New York.
12.8. EXCLUSIVITY. Prior to the Termination Date, neither Comcast
-----------
nor any Transferor shall, or shall permit any of their respective directors,
officers, partners, employees, representatives, agents or Affiliates to (x)
initiate contact with, solicit or encourage any inquiries, proposals or offers
by, or (y) participate in any discussions or negotiations with, or disclose any
information concerning the Transferors to, any Person other than Buyer in
connection with any possible proposal regarding the sale of the Assets or the
Business. In the event that Comcast or a Transferor breaches any of its
obligations pursuant to this Section 12.8, Comcast and each Transferor, jointly
and severally, agrees, in addition to any other remedies that Buyer may have in
law or equity, to promptly upon such breach reimburse Buyer for all of Buyer's
Expenses.
12.9. CONSENT TO JURISDICTION. For purposes of this Agreement, each
-----------------------
of the parties hereto hereby irrevocably submits to the non-exclusive
jurisdiction of any New York State or Federal court sitting in New York County,
New York or the Southern District of the State of New York. Each of the parties
hereto irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court and any claim that any such suit,
action or proceeding brought in such a court has been brought in
63
<PAGE>
an inconvenient forum. The parties hereto each agree that a final judgment in
any such suit, action or proceeding brought in such a court shall be conclusive
and binding.
ARTICLE XIII
DEFINITIONS AND INTERPRETATION
------------------------------
13.1. DEFINITIONS. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 13.1 and shall be equally
applicable to both the singular and plural forms.
"ADJUSTMENT" has the meaning specified in Section 2.3(e).
----------
"AFFILIATE" means, with respect to any Person, any other Person which
---------
directly or indirectly controls, is controlled by or is under common control
with such Person.
"ANTICIPATED 1993 COMPENSATION" has the meaning specified in Section
-----------------------------
4.5(b)(V).
"APPRAISAL" has the meaning specified in Section 2.2(a).
---------
"ARBITRATOR" has the meaning specified in Section 2.3(g).
----------
"ASSETS" has the meaning specified in Section 1.1.
------
"ASSIGNMENT" means an assumption in the form attached as Exhibit G.
----------
"ASSUMED LIABILITIES" has the meaning specified in Section 1.3.
-------------------
"ASSUMPTION" means an assumption in the form attached as Exhibit E.
----------
"BENEFIT PLAN" means an employee benefit or other plan established or
------------
maintained by Comcast, the Transferors or any ERISA Affiliate or to which
Comcast, the Transferors or any ERISA Affiliate makes or is obligated to make,
or during the five (5) years ending on the date hereof, has made or was
obligated to make, contributions and which is covered by Title IV of ERISA or
Section 302 of ERISA or Section 412 of the Code and which is a defined benefit
plan within the meaning of Section 3(35) of ERISA and which is not a
Multiemployer Plan.
"BILL OF SALE" means a bill of sale in the form attached as Exhibit F.
------------
64
<PAGE>
"BUFFALO PROPERTY" has the meaning specified in Section 4.10.
----------------
"BUSINESS" has the meaning specified in the first recital hereof.
--------
"BUYER" has the meaning specified in the first paragraph hereof.
-----
"BUYER ANCILLARY AGREEMENTS" means all agreements, instruments and
--------------------------
documents being or to be executed and delivered by Buyer hereunder or pursuant
hereto. Without limiting the generality of the foregoing, the Exchange Note
will, if issued, be a Buyer Ancillary Agreement.
"BUYER GROUP MEMBER" means Buyer, its partners, its partners' partners
------------------
and their Affiliates and their directors, officers, employees, agents, attorneys
and consultants and their respective successors and assigns.
"BUYER'S ACCOUNTANT" has the meaning specified in Section 2.3(g).
------------------
"BUYER'S EXPENSES" means all reasonable out-of-pocket expenses and
----------------
fees, actually incurred by or on behalf of Buyer, including out-of-pocket
expenses and fees paid or owed to third parties in connection with the
transactions contemplated by this Agreement.
"CASH CONSIDERATION" has the meaning specified in Section 2.1.
------------------
"CASH EQUIVALENT" means a cash equivalent or any security for which a
---------------
current fair value can be readily determined by reference to current quotations
on an established trading market, as determined reasonably and in good faith by
Buyer.
"CENTRE PARTNERS" means Centre Partners L.P., a Delaware limited
---------------
partnership.
"CERCLA" has the meaning specified in the definition of "Hazardous
------
Substances".
"CLAIM" has the meaning specified in Section 10.6.
-----
"CLAIM ACKNOWLEDGEMENT PROCEDURE" has the meaning specified in Section
-------------------------------
10.6.
"CLAIM NOTICE" has the meaning specified in Section 10.5.
------------
65
<PAGE>
"CLOSING" means the closing of the Transfer of the Assets from the
-------
Transferors to Buyer and the payment of the Purchase Price from Buyer to the
Selling Parties and the issuance of the Partnership Interest to the Contributing
Parties, and "CLOSE" has a comparable meaning.
-----
"CLOSING DATE" has the meaning specified in Section 3.1.
------------
"CLOSING DATE BALANCE SHEET" has the meaning specified in Section
--------------------------
2.3(b).
"CLOSING PAYMENT" has the meaning specified in Section 2.4(b).
---------------
"CODE" means the Internal Revenue Code of 1986, as amended from time
----
to time, and any successor statute thereto and all final or temporary
regulations promulgated thereunder and published, generally applicable rulings
entitled to precedential effect.
"COMCAST'S ACCOUNTANT" has the meaning specified in Section 2.3(g).
--------------------
"COMMITMENT LETTER" has the meaning specified in Section 5.4.
-----------------
"COMMUNICATIONS ACT" has the meaning specified in Section 4.30.
------------------
"CONSIDERATION" has the meaning specified in Section 2.1.
-------------
"CONTEST NOTICE" has the meaning specified in Section 2.3(f).
--------------
"CONTRACTS" has the meaning specified in Section 1.1(x).
---------
"CONTRIBUTING PARTIES" has the meaning specified in the first
--------------------
paragraph hereof.
"COPYRIGHT ACT" means Title 17 of the United States Code Annotated,
-------------
Sections 101 et seq., currently in effect.
"DALLAS PROPERTY" has the meaning specified in Section 4.10.
---------------
"DAMAGES" has the meaning specified in Section 10.2.
-------
"DISCLOSURE" has the meaning specified in Section 6.8.
----------
66
<PAGE>
"DISPUTED MATTERS" has the meaning specified in Section 2.3(g).
----------------
"ENCUMBRANCE" means any mortgage, pledge, security interest, lien,
-----------
restriction on use or transfer, covenant, condition, option, easement, right of
way, lease, sublease, occupancy of right to occupy, voting agreement, adverse
claim or encumbrance or charge of any kind (including any agreement to give any
of the foregoing), any conditional sale or other title retention agreement, and
the filing of, or any agreement to give, any financing statement under the
Uniform Commercial Code or similar law of any jurisdiction.
"ENVIRONMENT" shall mean soil, surface waters, ground waters, land,
-----------
stream, sediments, surface or subsurface strata and ambient air.
"ENVIRONMENTAL APPROVALS" has the meaning specified in Section
-----------------------
4.17(a).
"ENVIRONMENTAL CONDITION" shall mean any condition with respect to the
-----------------------
Environment on any facility which is now or has heretofore been owned or used in
connection with the Business ("Facility"), whether or not yet discovered, which
could nor does result in any Damages, including any condition resulting from the
operation of the Business or the operation of the Business of any subtenant or
occupant of any Facility.
"ENVIRONMENTAL CONSULTANT" has the meaning specified in Section
------------------------
6.1(b).
"ENVIRONMENTAL LAWS" shall mean all Governmental Rules relating to
------------------
injury to, or the protection of, real or personal property or human health or
the Environment as in effect prior to the Closing Date, including, without
limitation, all valid and lawful requirements of courts and other Governmental
Bodies pertaining to reporting, licensing, permitting, investigation,
remediation and removal of, emissions, discharges, releases or threatened
releases of Hazardous Substances (as defined herein), chemical substances,
pesticides, petroleum or petroleum products, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the Environment, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances, pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and any successor statute thereto and all final or
temporary regulations
67
<PAGE>
promulgated thereunder and published, generally applicable rulings entitled to
precedential effect.
"ERISA AFFILIATE" means all members of a controlled group of
---------------
corporations and all trades or businesses (whether or not incorporated) under
common control and all other entities which, together with Comcast, the
Transferors or any subsidiaries thereof, as the case may be, are treated as a
single employer under any or all of Sections 414(b), (c), (m) or (o) of the
Code.
"ESTIMATED BALANCE SHEET" has the meaning specified in Section 2.4(a).
-----------------------
"EXCHANGE NOTES" has the meaning specified in the Second Amended and
--------------
Restated Partnership Agreement.
"EXCLUDED ASSETS" has the meaning specified in Section 1.2.
---------------
"EXCLUDED CONTRACT" means any contract or other agreement not
-----------------
Transferred to the Buyer pursuant hereto by reason of a consent, approval or
modification of a third party required to Transfer any such contract or
agreement not being obtained.
"EXCLUDED LIABILITIES" has the meaning specified in Section 1.4.
--------------------
"FACILITY" has the meaning specified in the definition of
--------
"Environmental Condition".
"FCC" has the meaning specified in Section 4.30.
---
"FCC RULES" has the meaning specified in Section 4.30.
---------
"GAAP" means United States generally accepted accounting principles.
----
"GOVERNMENTAL BODY" means any Federal, state, local or foreign
-----------------
governmental authority or regulatory body, any subdivision, agency, commission
or authority thereof (including, without limitation, environmental protection,
planning and zoning), or any quasi-governmental or private body exercising any
regulatory authority thereunder and any Person directly or indirectly owned by
and subject to the control of any of the foregoing, or any court, arbitrator or
other judicial or quasi-judicial tribunal.
"GOVERNMENTAL PERMITS" has the meaning specified in Section 4.9.
--------------------
"GOVERNMENTAL RULE" means any statute, law, treaty, rule, code,
-----------------
ordinance, regulation, permit, certificate or order
68
<PAGE>
of any Governmental Body or any judgment, decree, injunction, writ, order or
like action of any Governmental Body.
"HAZARDOUS SUBSTANCES" shall mean any substance:
--------------------
(a) the presence of which requires notification, investigation, or
remediation under any Environmental Law as in effect prior to the Closing Date;
or
(b) which prior to the Closing Date is or becomes defined as a
"hazardous waste", "hazardous material" or "hazardous substance" or "pollutant"
or "contaminant" under any present or future Environmental Law or amendments
thereto including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et seq.), the
-- ---
Resource Conservation and Recovery Act ("RCRA") (42 U.S.C. Section 6901 et
--
seq.), the Clean Air Act, 42 U.S.C. (S) 7401 et seq. and any Environmental Law
- --- -- ---
applicable to any jurisdiction in which or from which a Transferor conducts or
has conducted the Business; or
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any Governmental Body under Environmental Laws prior to the Closing
Date; or
(d) without limitation, which contains gasoline, diesel fuel or
other petroleum hydrocarbons or volatile organic compounds; or
(e) without limitation, which contains polychlorinated byphenyls
(PCBs) or asbestos or urea formaldehyde foam insulation; or
(f) without limitation, which contains or emits radioactive
particles, waves or materials, including radon gas.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of
---
1976 and regulations thereunder.
"INDEMNITEE" has the meaning specified in Section 10.5(a).
----------
"INDEMNITOR" has the meaning specified in Section 10.5(a).
----------
"INSTRUMENTS OF ASSIGNMENT" means such deeds containing warranties of
-------------------------
the applicable Transferor substantially similar to those such Transferor
received from the Person from whom such Transferor purchased the applicable
Property, bills of sale,
69
<PAGE>
intellectual property assignments and other appropriate instruments to effect
the Transfer of the Assets.
"INSTRUMENTS OF ASSUMPTION" means such appropriate instruments to
-------------------------
effect Buyer's assumption of the Assumed Liabili ties.
"INTELLECTUAL PROPERTY ASSIGNMENT" has the meaning specified in
--------------------------------
Section 7.10.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning speci fied in Section
----------------------------
1.1(vi).
"INVENTIONS" has the meaning specified in Section 1.1(vi).
----------
"IRS" means the Internal Revenue Service.
---
"IRVING PROPERTY" has the meaning specified in Section 4.10.
---------------
"KNOWLEDGE" means the knowledge of the relevant entity's responsible
---------
employees or agents.
"LETTER OF INTENT" has the meaning specified in Section 12.2.
----------------
"MARCH BALANCE SHEET" means the consolidated balance sheet of the
-------------------
Transferors as of March 31, 1993 attached as Exhibit H.
"MARCH BALANCE SHEET DATE" means March 31, 1993.
------------------------
"MATERIAL AGREEMENTS" has the meaning specified in Section 4.21.
-------------------
"MATERIAL PROPRIETARY RIGHTS" has the meaning specified in Section
---------------------------
4.15.
"MLP ACQUISITION" has the meaning specified in Section 5.1(b).
---------------
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA.
"MUSIC HOLDINGS" has the meaning specified in Section 5.1(c).
--------------
"MUZAK LICENSE AGREEMENTS" means those certain license agreements
------------------------
between Buyer and each of the Transferors party thereto, pursuant to which,
among other things, such Transferors license the trademark "Muzak".
70
<PAGE>
"NET ASSETS" has the meaning specified in Section 2.3(c).
----------
"NON-COMPETITION AGREEMENT" means the Non-Competition Agreement dated
-------------------------
the Closing Date among Comcast, the Transferors and Buyer in the form attached
as Exhibit A.
"NOTICE PARTY" has the meaning specified in Section 1.7.
------------
"PARTNERSHIP INTEREST" has the meaning specified in Section 2.1.
--------------------
"PBGC" means the Pension Benefit Guaranty Corporation or any person
----
succeeding to the functions thereof.
"PEORIA PROPERTY" has the meaning specified in Section 4.10.
---------------
"PERMITTED ENCUMBRANCES" means liens for taxes and other governmental
----------------------
charges and assessments which are not yet due and payable, immaterial
mechanical, materialmen's and similar liens, and all Encumbrances set forth on
Schedule 4.10(b).
"PERSON" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
Governmental Body.
"PHASE I AUDIT" has the meaning specified in Section 6.1(b).
-------------
"PHASE II AUDIT" has the meaning specified in Section 6.1(b).
--------------
"PHILADELPHIA SUBLEASE" shall mean the form of sublease attached
---------------------
hereto as Exhibit I.
"PRIOR ASSET PURCHASE AGREEMENT" means that certain Asset Purchase
------------------------------
Agreement, dated as of March 11, 1992 among Muzak Limited Partnership,
Field/Muzak, Inc., The Field Corporation and MLP Operating, L.P., as amended.
"PROPERTIES" has the meaning specified in Section 4.10.
----------
"PROPRIETARY RIGHTS" has the meaning specified in Section 1.1(vi).
------------------
"PROPRIETARY RIGHTS LICENSES" has the meaning specified in Section
---------------------------
1.1(vi).
"PROTECTED INFORMATION" has the meaning specified in Section 7.11.
---------------------
71
<PAGE>
"RCRA" has the meaning specified in the definition of "Hazardous
----
Substances".
"RESPONSIBLE PARTY" has the meaning specified in Section 1.7.
-----------------
"SCA AGREEMENT" has the meaning specified in Section 4.19(a)(ix).
-------------
"SCA LESSOR" has the meaning specified in Section 4.19(a)(ix).
----------
"SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT" has the meaning
-------------------------------------------------
specified in Section 7.18.
"SELLING PARTY" has the meaning specified in the first paragraph
-------------
hereof.
"SOFTWARE" has the meaning specified in Section 1.1(a)(vi).
--------
"SUBORDINATION AGREEMENT" has the meaning specified in Section 8.13.
-----------------------
"TAX" means all foreign, and all U.S. Federal, state, and local,
---
income, gross receipts, import, ad valorem, VAT, license, stamp, documentary,
estimated or interim, employment, payroll, withholding, minimum, franchise,
profits, sales, transfer, use, gains, recordation, property, occupancy, excise
or other taxes, together with all assessments, interest, penalties,
deficiencies, fees, additions to tax and other governmental charges or
impositions relating thereto, imposed by any Governmental Body.
"TAX RETURN" means any return, report, document, statement or form
----------
required to be filed (whether on a consolidated, combined, separate or unitary
basis) with respect to any Taxes (including any schedules required to be
attached thereto), including, without limitation, information returns, claims
for refund, amended returns, and declarations of estimated Tax.
"TECHNICAL INFORMATION" has the meaning specified in Section
---------------------
1.1(a)(vi).
"TERMINATION DATE" has the meaning specified in Section 11.1.
----------------
"TRANSFER" means sell, transfer, assign, convey, lease and/or deliver
--------
(other tenses of the term have similar meaning) or sale, transfer, assignment,
conveyance, lease and/or delivery, as indicated by the context.
72
<PAGE>
"TRANSFERORS" has the meaning specified in the first paragraph hereof.
-----------
"TRANSFEROR ANCILLARY AGREEMENTS" means all agreements, instruments
-------------------------------
and documents being or to be executed and delivered by Comcast or any Transferor
hereunder or pursuant hereto.
"TRANSFEROR GROUP MEMBER" means the Transferors, Comcast, and their
-----------------------
Affiliates, officers, employees, agents, attorneys and consultants and their
respective successors and assigns.
"WARN ACT" means the Worker Adjustment and Retraining Notification
--------
Act.
13.2. INTERPRETATION. As used herein, (a) "include", "includes" and
--------------
"including" are deemed to be followed by "without limitation" whether or not
they are in fact followed by such word or words of like import, (b) references
to any agreement or other document or Governmental Rule are to it as amended and
supplemented from time to time (and, in the case of a Governmental Rule, to any
successor provision in the absence of an explicit contrary specification set
forth in this Agreement), (c) references to "Article", "Section" or another
subdivision or to an attachment, "Exhibit" or "Schedule" are to an article,
section or subdivision hereof or an attachment, "Exhibit" or "Schedule" hereto,
and (d) "hereof ", "herein", "hereunder" and comparable terms refer to the
entirety hereof and not to any particular article, section or other subdivision
hereof or attachment hereto. Article titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation hereof. The Schedules and Exhibits
referred to herein shall be construed with and as an integral part hereof to the
same extent as if they were set forth verbatim herein. The specification of any
dollar amount in the representations or warranties contained herein or the
inclusion of any specific item in any Schedules hereto is not intended to imply
that such amounts, or higher or lower amounts, or the items so included or other
items, are or are not material, and neither party shall use the fact of the
setting of such amounts or the inclusion of any such item in any dispute or
controversy between the parties as to whether any obligation, item or matter not
described herein or included in a Schedule is or is not material for purposes
hereof.
73
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
COMCAST CORPORATION
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
COMCAST SOUND COMMUNICATIONS, INC.
(a Delaware corporation)
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
COMCAST SOUND COMMUNICATIONS, INC.
(a California corporation)
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
COMCAST SOUND COMMUNICATIONS, INC.
(a Colorado corporation)
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
COMCAST SOUND COMMUNICATIONS, INC.
(a Connecticut corporation)
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
COMCAST SOUND COMMUNICATIONS, INC.
(a Florida corporation)
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
74
<PAGE>
COMCAST SOUND COMMUNICATIONS, INC.
(a Texas corporation)
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
COMCAST SOUND COMMUNICATIONS, INC.
(a Michigan corporation)
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
COMCAST SOUND COMMUNICATIONS, INC.
(a New York corporation)
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
COMCAST SOUND COMMUNICATIONS, INC.
(a Pennsylvania corporation)
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
COMCAST SOUND COMMUNICATIONS, INC.
(an Illinois corporation)
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
COMCAST SOUND COMMUNICATIONS, INC.
(an Indiana corporation)
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
75
<PAGE>
COMCAST SOUND MANAGEMENT, INC.
By: [SIGNATURE ILLEGIBLE]
----------------------------
Title:
COMCAST SOUND COMMUNICATIONS
By: Comcast Sound Communications,
Inc. (an Illinois corporation),
general partner
By: [SIGNATURE ILLEGIBLE]
------------------------
Title:
By: Comcast Sound Communications,
Inc. (an Indiana corporation),
general partner
By: [SIGNATURE ILLEGIBLE]
------------------------
Title:
COMCAST REAL ESTATE HOLDINGS, INC.
By: [SIGNATURE ILLEGIBLE]
------------------------
Title
MUZAK LIMITED PARTNERSHIP
By: MLP ACQUISITION, L.P.
Managing General Partner
By: MUSIC HOLDINGS CORP.
General Partner
By: [SIGNATURE ILLEGIBLE]
------------------------
Title:
76
<PAGE>
Exhibit 10.3
<PAGE>
WAIVER, dated as of April 1, 1996 to the AMENDED AND RESTATED CREDIT
AGREEMENT (the "CREDIT AGREEMENT"), dated as of September 4, 1992, as amended
and restated as of January 31, 1994, as further amended, among Muzak Limited
Partnership, a Delaware limited partnership (the "BORROWER"), the Lenders
parties thereto (the "LENDERS") and Union Bank of Switzerland, New York Branch,
as agent for the Lenders (in such capacity, the "AGENT"). Unless otherwise
specifically defined herein, all capitalized terms used herein shall have the
respective meanings ascribed to such terms in the Credit Agreement.
WHEREAS, the Borrower desires to (i) sell the assets described under
the heading "Transaction #1" in the letter attached hereto as Exhibit A and more
fully described in Section 1 of the Letter of Intent attached thereto (the
"LETTER OF INTENT"), for a negotiable promissory note in the principal amount of
$480,000 (the "INPHONET NOTE"), substantially on the terms set forth in the
Letter of Intent, in the manner described therein and (ii) enter into a
transaction with Alcas Holdings B.V. ("ALCAS") and Muzak Europe B.V. ("MUZAK
EUROPE"), the Borrower's European joint venture with Alcas, substantially on the
terms described under the heading "Transaction #2" in the letter attached hereto
as Exhibit A, pursuant to which, among other things, the Borrower will
contribute its 30% ownership interest in Funktionelle Musik GmBH to Muzak Europe
(collectively, the "DESIGNATED TRANSACTIONS").
WHEREAS, the Borrower has requested that the Majority Lenders waive
compliance by the Borrower with Sections 10.4, 10.5 and 10.8 of the Credit
Agreement in order to consummate the Designated Transactions.
NOW THEREFORE, the parties hereto agree as follows:
1. The Majority Lenders hereby waive compliance by the Borrower with
Sections 10.4, 10.5 and 10.8 of the Credit Agreement solely with respect to the
consummation of the Designated Transactions; provided, that the Borrower shall
--------
pledge the Inphonet Note to the Agent as additional collateral security for the
payment, performance and observance of all Lender Debt; provided, further, that
-------- -------
all payments received by the Borrower under the Inphonet Note shall be paid to
the Agent and applied in accordance with the provisions of Section 3.1(c) of the
Credit Agreement.
2. The Waiver shall be applicable solely to the matters specified in
paragraph 1 hereof.
3. The Borrower represents and warrants that no Default or Event of
Default is continuing under the Credit Agreement.
4. This Waiver shall be deemed effective only upon (i) due execution
and delivery of counterparts of this Waiver to the Agent by each of the parties
signatory hereto, and (ii) delivery of the Inphonet Note to the Agent together
with an acknowledgment executed by the Borrower that the Inphonet Note is being
pledged to the Agent pursuant to the Note Pledge Agreement dated as of September
4, 1992, by and between the Borrower and the Agent.
<PAGE>
5. This Waiver shall be governed by the internal laws of the State of
New York.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed by their respective officers thereunder duly authorized as of the
date first above written.
UNION BANK OF SWITZERLAND, NEW YORK BRANCH, as
Agent and as a Lender
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
EUROPEAN AMERICAN BANK, as a Lender
By:___________________________
Name:
Title:
2
<PAGE>
FLEET NATIONAL BANK, as a Lender
By:__________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY, as a Lender
By:___________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By:___________________________
Name:
Title:
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By: /s/ Kirk A Collamer
------------------------
Name: Kirk A. Collamer
Title:
3
<PAGE>
AMENDMENT NO. 5 TO AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------------------------
AMENDMENT NO. 5, dated as of November 7, 1995, to the AMENDED AND
RESTATED CREDIT AGREEMENT (the "CREDIT AGREEMENT"), dated as of January 31,
1994, and as amended as of October 31, 1994, as of November 2, 1994, as of
November 4, 1994 and as of November 17, 1994, among MUZAK LIMITED PARTNERSHIP, a
Delaware limited partnership (the "BORROWER"), UNION BANK OF SWITZERLAND, NEW
YORK BRANCH, INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, EUROPEAN
AMERICAN BANK, FLEET NATIONAL BANK and IBJ SCHRODER BANK & TRUST COMPANY as
Lenders (the "LENDERS") and UNION BANK OF SWITZERLAND, NEW YORK BRANCH, as agent
for the Lenders (in such capacity, the "AGENT"). Unless otherwise specifically
defined herein, all capitalized terms used herein shall have the respective
meanings ascribed to such terms in the Credit Agreement.
The Borrower, the Lenders and the Agent are parties to the Credit
Agreement, pursuant to which the Lenders have advanced Loans to the Borrower
upon the terms and subject to the conditions set forth therein.
Each of the Borrower, the Lenders and the Agent desire to increase the
Aggregate Revolving Commitments under the Credit Agreement from $8,000,000 to
$13,000,000 and adjust certain financial covenants under the Credit Agreement.
In order to effectuate these changes and certain other changes, the parties
hereto desire that the Credit Agreement be amended by this Amendment No. 5.
ACCORDINGLY, the parties hereto agree as follows:
1. Amendment to Section 1.1 (a) Section 1.1 of the Credit
------------------------
Agreement is hereby amended by (x) deleting the reference to the percentage
"80%" in the fifth line of the definition of the term "Borrowing Base", (y)
substituting therefor the percentage "85%" and (z) adding to the end of such
definition the following:
", plus (c) 100% of the amount of Cash in Bank"
(b) Section 1.1 of the Credit Agreement is hereby amended by adding
to the end of the definition of the term "Capital Expenditures" the following:
"and provided, further, that solely for the purpose of calculating the
covenant set forth in Section 9.21(f) hereof for the Fiscal Years ending
December 31, 1995 and December 31, 1996, Capital Expenditures shall exclude
aggregate New Ventures Capital Expenditures not in excess of $4,000,000 for
the period comprised of the Fiscal Years ending December 31, 1995 and
December 31, 1996."
<PAGE>
(c) Section 1.1 of the Credit Agreement is hereby amended by (x)
adding the word "Adjusted" before the term "EBITDA" in the third line of the
definition of the term "Fixed Charge Coverage Ratio", and (y) adding the phrase
"minus Growth Capital Expenditures" after the phrase "(x) Capital Expenditures"
in the third line of the definition of the term "Fixed Charge Coverage Ratio".
(d) Section 1.1 of the Credit Agreement is hereby amended by adding
the word "Adjusted" before the term "EBITDA" in the second line of the
definition of the term "Interest Coverage Ratio".
(e) Section 1.1 of the Credit Agreement is hereby amended by deleting
clause (b) of the definition of the term "Leverage Ratio" in its entirety and
substituting therefor "(b) Adjusted EBITDA at such time".
(f) Section 1.1 of the Credit Agreement is hereby amended by adding
the following defined terms in their alphabetical order:
"ADJUSTED EBITDA"shall mean EBITDA (x) minus, to the extent not
deducted in calculating the Net Income component of EBITDA, Capitalized
Subscriber Acquisition Costs, Capitalized Installation Costs and
Capitalized Master Recording Costs for the applicable fiscal period, (y)
plus, to the extent deducted in calculating the Net Income component of
EBITDA, Deferred Installation Revenue for the applicable fiscal period, and
(z) solely for the purpose of calculating the covenant set forth in Section
9.21(f) hereof for the Fiscal Years ending December 31, 1995 and December
31, 1996, plus, to the extent deducted pursuant to clause (x) above and
relating to New Ventures, aggregate Capitalized Subscriber Acquisition
Costs, Capitalized Installation Costs and Capitalized Master Recording
Costs not in excess of $4,000,000 for the period comprised of the Fiscal
Years ending December 31, 1995 and December 31, 1996."
"AVERAGE CAPITAL COST PER NEW SUBSCRIBER" shall mean the total
capitalized costs in such fiscal period actually incurred in adding new
subscribers divided by the number of such new subscribers, which
calculations shall be acceptable to Agent in its reasonable discretion.
"BLOCKED ACCOUNT AGREEMENT" shall mean a Blocked Account
Agreement between a bank at which a Cash in Bank Account is maintained and
the Borrower or Subsidiary thereof in whose name such Cash in Bank Account
was established in form and substance acceptable to the Agent in its
reasonable discretion executed pursuant to Section 9.23 hereof.
2
<PAGE>
"CAPITALIZED INSTALLATION COSTS" shall mean actual costs
capitalized by the Borrower pursuant to GAAP which were incurred by the
Borrower in installing equipment provided to subscribers primarily direct
labor and other related expenditures.
"CAPITALIZED MASTER RECORDINGS" shall mean direct and indirect
costs capitalized by the Borrower pursuant to GAAP which were incurred by
the Borrower in producing certain master recordings with future value.
"CAPITALIZED SUBSCRIBER ACQUISITION COSTS" shall mean commissions
and other direct selling costs capitalized by the Borrower pursuant to GAAP
which were actually incurred by the Borrower to obtain new subscribers in
such fiscal period.
"CASH IN BANK" shall mean, as of any time, an amount equal to (a)
the aggregate payments received by the Borrower and its Subsidiaries in
respect of Eligible Receivables to the extent (x) deposited in a Cash in
Bank Account, (y) deducted from the amount of Eligible Receivables and (z)
not yet credited to such Cash in Bank Account due to ordinary delays
related to collection (and not as a result of items returned due to
insufficient funds), minus (b) checks outstanding not yet debited to such
Cash in Bank Account.
"CASH IN BANK ACCOUNT" shall mean one of the bank accounts, each
in the name of the Borrower or one of its Subsidiaries, listed in Schedule
1-h attached hereto.
"DEFERRED INSTALLATION REVENUE" shall mean installation-related
revenue of the Borrower during any fiscal period, without taking into
account that such amounts may be deferred and recognized over the related
contract life.
"GROWTH CAPITAL EXPENDITURES" shall mean for any fiscal period
the sum of (x) New Ventures Capital Expenditures, plus (y) the net amount
of Capital Expenditures relating to and supported by the net increase in
the number of subscribers (i.e., number of new subscribers minus the number
of subscriber cancellations, multiplied by the Average Capital Cost Per New
Subscriber).
"MANDATORY CAPITAL CONTRIBUTION AGREEMENT" shall mean that
certain Mandatory Capital Contribution Agreement between the Borrower and
one or more holders of Class A-1 Partnership Interests, Class A-2
Partnership Interests, Class B Partnership Interests or any combination
thereof, which (i) shall provide for the irrevocable obligation by such
holders to contribute capital on or prior to effectuation of any Special
New Venture Capital Expenditures in an amount at least
3
<PAGE>
equal to (x) the Special New Venture Capital Expenditures Overage plus (y)
the cumulative amount of negative cash flow (calculated for each Fiscal
Year and without giving credit or offsets for positive cash flow in any
other Fiscal Year, all based upon financial projections covering at least
the initial five Fiscal Years of such Special New Venture, the basis and
results of such financial projections being satisfactory to the Lenders in
their reasonable discretion) projected to result from the Special New
Venture, if any, (ii) shall be collaterally assigned to the Agent for the
benefit of the Lenders, and (iii) shall be in form and substance acceptable
to the Agent in its reasonable discretion.
"NEW VENTURES" shall mean any contract, joint venture entered
into by the Borrower after November 7, 1995, including, without limitation,
the joint venture entered into pursuant to that certain Joint Venture
Agreement between Alcas Holdings B.V., a Netherlands corporation, and
Borrower, dated August 2, 1995, any new contract with a national chain and
any contract with a direct broadcast provider, in each case requiring
capital expenditures (including installation labor) in excess of
$1,000,000.
"NEW VENTURES CAPITAL EXPENDITURES" shall mean Capital
Expenditures related to the New Ventures including, but not limited to,
Capitalized Installation Costs and other capitalized costs related to the
New Ventures.
"SPECIAL NEW VENTURE" shall mean the New Venture that is funded
by capital contributions pursuant to the Mandatory Capital Contribution
Agreement.
"SPECIAL NEW VENTURE CAPITAL EXPENDITURES" shall mean Capital
Expenditures related to the Special New Venture.
"SPECIAL NEW VENTURE CAPITAL EXPENDITURES OVERAGE" shall mean the
amount by which the Special New Venture Capital Expenditures shall cause
the aggregate Capital Expenditures of the Borrower and its Subsidiaries in
a fiscal period to exceed the amount of Capital Expenditures permitted for
such fiscal period pursuant to Section 10.1 hereof.
2. Addition of Schedule 1-h. The schedules to the Credit Agreement
------------------------
are hereby amended by adding thereto, after Schedule 1-g, Schedule 1-h attached
hereto.
3. Amendment to Schedule 2.2. Schedule 2.2 to the Credit Agreement
-------------------------
is hereby amended by deleting such Schedule in its entirety and substituting
therefor Schedule 2.2 attached hereto.
4
<PAGE>
4. Amendment to Section 2.2(a). Section 2.2(a) of the Credit
---------------------------
Agreement is hereby amended by deleting the reference to the figure "$8,000,000"
in the third line thereof and substituting therefor the figure "$13,000,000".
5. Amendment to Section 2.9(f). Section 2.9(f) of the Credit
---------------------------
Agreement is hereby amended by (x) deleting the references to the ratio "4.75x"
in the fourth and seventh lines thereof and substituting therefor the ratio
"4.00x", and (y) deleting the references to the ratio "5.25x" in the eleventh
and fourteenth lines thereof and substituting therefor the ratio "4.50x".
6. Amendment to Section 3.1(k). Section 3.1(k) of the Credit
---------------------------
Agreement is hereby amended by deleting clauses (ii), (iii) and (iv) thereof in
their entirety and substituting therefor the following:
"(ii) $10,000,000 for the Fiscal Years ending December 31, 1995 and
December 31, 1996, (iii) $9,000,000 for the Fiscal Year ending December 31,
1997, and (iv) $7,500,000 for each Fiscal Year thereafter."
7. Amendment to Section 4.1(c). Section 4.1(c) of the Credit
---------------------------
Agreement is hereby amended by deleting the reference to the figure "$8,000,000"
in the fifteenth line thereof and substituting therefor the figure
"$13,000,000".
8. Amendment to Schedule 5.4. Schedule 5.4 to the Credit Agreement
-------------------------
is hereby amended by deleting such schedule in its entirety and substituting
therefor Schedule 5.4 attached hereto.
9. Amendment to Schedule 9.1(j). Schedule 9.1(j) to the Credit
----------------------------
Agreement is hereby amended by deleting such schedule in its entirety and
substituting therefor Schedule 9.1(j) attached hereto.
10. Amendment to Section 9.1(k). Section 9.1(k) of the Credit
---------------------------
Agreement is hereby amended by deleting the phrase "thirty days prior to"
appearing in the first and fifth lines thereof.
11. Amendment to Section 9.21(a). Section 9.21(a) of the Credit
----------------------------
Agreement is hereby amended by deleting the table contained therein in its
entirety and substituting therefor the following:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
1994 $ 17,500,000
1995 15,000,000
1996 10,000,000
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
1997 and thereafter 10,000,000 plus 50% of cumulative positive
Net Income for the Fiscal Years
commencing with the Fiscal Year
ending December 31, 1997
</TABLE>
12. Amendment to Section 9.21(b). Section 9.21(b) of the Credit
----------------------------
Agreement is hereby amended by deleting the table contained therein in its
entirety and substituting therefor the following:
<TABLE>
<CAPTION>
Period of Four Fiscal
Quarters Ending on the
Following Dates: Amount
--------------------- ------
<S> <C>
March 31, 1994 $ 12,200,000
June 30, 1994 14,400,000
September 30, 1994 16,000,000
December 31, 1994 16,500,000
March 31, 1995 17,500,000
June 30, 1995 18,000,000
September 30, 1995 18,500,000
December 31, 1995 19,000,000
March 31, 1996 19,000,000
June 30, 1996 19,000,000
September 30, 1996 19,000,000
December 31, 1996 20,000,000
March 31, 1997 20,000,000
June 30, 1997 20,000,000
September 30, 1997 20,000,000
December 31, 1997 21,500,000
March 31, 1998 21,500,000
June 30, 1998 21,500,000
September 30, 1998 21,500,000
December 31, 1998 23,000,000
March 31, 1999 23,000,000
June 30, 1999 23,000,000
September 30, 1999 23,000,000
December 31, 1999 25,000,000
March 31, 2000 25,000,000
June 30, 2000 25,000,000
September 30, 2000 25,000,000
December 31, 2000 26,000,000
</TABLE>
6
<PAGE>
13. Amendment to Section 9.21(d). Section 9.21(d) of the Credit
----------------------------
Agreement is hereby amended by deleting the table contained therein in its
entirety and substituting therefor the following:
<TABLE>
<CAPTION>
Fiscal Year Ratio
----------- -----
<S> <C>
1994 3.25
1995 4.50
1996 4.10
1997 3.50
1998 3.00
1999 2.50
2000 2.00
</TABLE>
14. Amendment to Section 9.21(e). Section 9.21(e) of the Credit
----------------------------
Agreement is hereby amended by deleting the table contained therein in its
entirety and substituting therefor the following:
<TABLE>
<CAPTION>
Period of Four Fiscal
Quarters Ending on the
Following Dates: Ratio
---------------------- -----
<S> <C>
March 31, 1994 2.75
June 30, 1994 2.75
September 30, 1994 2.75
December 31, 1994 2.75
March 31, 1995 3.00
June 30, 1995 3.00
September 30, 1995 3.00
December 31, 1995 2.25
March 31, 1996 2.25
June 30, 1996 2.25
September 30, 1996 2.25
December 31, 1996 2.50
March 31, 1997 2.50
June 30, 1997 2.50
September 30, 1997 2.50
December 31, 1997 2.75
March 31, 1998 2.75
June 30, 1998 2.75
September 30, 1998 2.75
December 31, 1998 3.00
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
March 31, 1999 3.00
June 30, 1999 3.00
September 30, 1999 3.00
December 31, 1999 3.25
March 31, 2000 3.25
June 30, 2000 3.25
September 30, 2000 3.25
December 31, 2000 3.50
</TABLE>
15. Amendment to Section 9.21(f). Section 9.21(f) of the Credit
----------------------------
Agreement is hereby amended by deleting the table contained therein in its
entirety and substituting therefor the following:
<TABLE>
<CAPTION>
Fiscal Year Ratio
----------- -----
<S> <C>
1994 1.10
1995 0.90
1996 0.90
1997 1.00
1998 1.10
1999 1.10
2000 1.10
</TABLE>
16. Addition of Section 9.23. Article IX of the Credit Agreement is
------------------------
hereby amended by adding to the end thereof the following:
"(S) 9.23. Blocked Account Agreements. Upon written
--------------------------
request from the Agent, the Borrower and each of its Subsidiaries
shall, as soon as practicable and in any event within 60 Business Days
thereafter, enter into a Blocked Account Agreement with respect to
each Cash in Bank Account specified by Agent in such request."
17. Amendment to Section 10.1(a). (a) Section 10.1(a) of the Credit
----------------------------
Agreement is hereby amended by adding after the term "Fiscal Year" in the third
line thereof the words "or fiscal quarter, as applicable,".
(b) Section 10.1(a) of the Credit Agreement is hereby amended by
adding after the phrase "any such period" appearing in the fourth line thereof
the following:
"(other than with respect to a commitment to make the Special New
Venture Capital Expenditure)".
8
<PAGE>
(c) Section 10.1(a) of the Credit Agreement is hereby amended by
deleting the table contained therein in its entirety and substituting therefor
the following:
<TABLE>
<CAPTION>
Period Ending Amount
------------- ------
<S> <C>
1994 $ 9,250,000
1995 8,000,000
March 31, 1996 1,875,000
June 30, 1996 1,875,000
September 30, 1996 1,875,000
December 31, 1996 1,875,000
1997 7,250,000
1998 7,250,000
1999 7,250,000
2000 7,250,000
</TABLE>
(d) Section 10.1(a) of the Credit Agreement is hereby amended by (x)
adding after the phrase "in any Fiscal Year" appearing in the first line of the
proviso thereof the parenthetical "(other than the Fiscal Year ending December
31, 1995)", (y) deleting the reference to the percentage "50%" in the second
line of the proviso thereto, and (z) substituting therefor the percentage
"100%".
(e) Section 10.1(a) of the Credit Agreement is hereby amended by
adding to the end of the proviso thereof the following additional provisos:
"and provided, further, that the amount of permitted Capital
Expenditures in the fiscal quarters ending June 30, 1996, September
30, 1996 and December 31, 1996 shall be increased by an amount equal
to 100% of the amount of permitted Capital Expenditures under this
Section 10.1 for any prior fiscal quarter in 1996 to the extent not
previously expended by the Borrower and its Subsidiaries, and
provided, further, that solely for the purposes of this Section
10.1(a), "Capital Contributions" shall not include amounts funded for
the Special New Venture pursuant to the Mandatory Capital Contribution
Agreement."
18. Amendment to Schedule 10.3. Schedule 10.3 to the Credit
--------------------------
Agreement is hereby amended by adding to the end thereof the following:
"3. Indemnification and Hold Harmless Agreement dated October 27,
1995 between Muzak and Bruce McKagan -- Muzak has agreed to indemnify
Bruce McKagan, an employee of Muzak, against any claims by Sight &
Sound Entertainment, Inc. arising from Bruce McKagan's termination of
his employment with Sight & Sound Entertainment, Inc."
9
<PAGE>
19. Amendment to Schedule 12.1(c). Schedule 12.1(c) to the Credit
-----------------------------
Agreement is hereby amended by deleting (x) the names "Daniele H. Wells",
"Therese M. Oliver", "Gary D. Alshouse", "John W. Stoddard" and "Michael W.
Murray" and (y) the amounts listed to the right of such names appearing on the
second page thereof.
20. Amendment to Schedule 12.4. (a) Schedule 12.4 to the Credit
--------------------------
Agreement is hereby amended by adding to the end of Section (a)4(a) appearing on
the first page thereof the following:
"Bridgeport, Connecticut - Personal Property Tax, Sales and Use Tax
and Payroll Tax.
City of Sacramento - Personal Property Tax.
State of California - Sales and Use Tax."
(b) Schedule 12.4 to the Credit Agreement is hereby amended by adding
at the end of Section (a)10 thereof the following:
"11. Muzak L.P. v. Pallone Management, Inc., Franklin County, Ohio
--------------------------------------
Court of Common Pleas, Case No. 94CVH-11-8275.
In early August 1994, Muzak filed a collection action against its
customer, Pallone Management, Inc. ("Pallone") for approximately
$5,000. Pallone filed a counterclaim alleging misrepresentation
and fraudulent inducement, and seeking $25,000 in actual and
$400,000 in punitive damages. Muzak has filed a reply denying the
counterclaim."
21. Amendment to Schedule 12.5(a)-1. Schedule 12.5(a)-1 to the
-------------------------------
Credit Agreement is hereby amended by deleting in its entirety Section D
appearing on the first page thereof and substituting therefor "D. INTENTIONALLY
OMITTED".
22. Amendment to Schedule 12.5(a)-2. Schedule 12.5(a)-2 to the
-------------------------------
Credit Agreement is hereby amended by deleting such schedule in its entirety and
substituting therefor Schedule 12.5(a)-2 attached hereto.
23. Amendment to Schedule 12.6. (a) Schedule 12.6 to the Credit
--------------------------
Agreement is hereby amended by adding to the end of Section 1 appearing on the
first page thereof the following:
"The ASCAP rates dispute has now been settled and rates have been set
at a mutually acceptable level."
10
<PAGE>
(b) Schedule 12.6 to the Credit Agreement is hereby amended by adding
to the end of Section 10(a) appearing on the second page thereof the following:
"Bridgeport, Connecticut - Personal Property Tax, Sales and Use Tax
and Payroll Tax.
City of Sacramento - Personal Property Tax.
State of California - Sales and Use Tax."
(c) Schedule 12.6 to the Credit Agreement is hereby amended by adding
to the end thereof the following:
"12. Muzak's license with Broadcast Music, Inc. ("BMI") expired
on December 31, 1993. The parties are currently operating under an
interim agreement pending execution of a new license agreement between
the parties. New license negotiations are ongoing between the parties
and, until they are concluded, the parties will continue to operate
under the terms of the 1987 license agreement.
13. Pending litigation:
Muzak L.P. v. Pallone Management, Inc., Franklin County, Ohio Court of
Common Pleas, Case NO. 94CVH-11-8275.
In early August 1994, Muzak filed a collection action against its
customer, Pallone Management, Inc. ("Pallone") for approximately
$5,000. Pallone filed a counterclaim alleging misrepresentation and
fraudulent inducement, and seeking $25,000 in actual and $400,000 in
punitive damages. Muzak has filed a reply denying the counterclaim."
24. Conditions Precedent. Notwithstanding any other provisions of
--------------------
this Amendment No. 5 or the Loan Documents, this Amendment No. 5 shall not
become effective unless and until the following conditions precedent shall have
occurred:
(a) the Agent shall have received this Amendment No. 5, executed and
delivered by a duly authorized officer or partner of each party to the Credit
Agreement;
(b) each Lender shall have returned to the Borrower for cancellation
the Revolving Note delivered to such Lender pursuant to Section 2.4 of the
Credit Agreement and the Borrower shall have delivered to each Lender a duly
executed, amended and restated Revolving Note (individually, an "AMENDED NOTE"
and collectively, the "AMENDED NOTES") payable to the order of
11
<PAGE>
such Lender in the principal amount listed in the Revolving Loan Amount column
to the right of such Lender's name on Schedule 2.2 hereto;
(c) the Agent shall have received an opinion, dated the date hereof,
of Rosenman & Colin, special New York counsel to the Borrower, in substantially
the form of Exhibit A hereto;
(d) each Lender shall have received on the date hereof (x) a fee of
1.00% on the amount of the increase in the Revolving Commitment of such Lender
provided for by the terms of this Amendment No. 5 and (y) an amendment fee of
.125% on the amount of such Lender's Commitment prior to the increase thereof
provided for by the terms this Amendment No. 5; and
(e) all fees, costs and expenses of counsel to the Agent and to UBS
relating to the transactions contemplated by this Amendment No. 5 billed on or
prior to the date hereof shall have been paid in full.
25. No Waiver. Except as expressly amended hereby, all of the
---------
representations, warranties, terms, covenants and conditions of the Loan
Documents shall remain in full force and effect in accordance with their
respective terms. The amendments set forth herein shall be limited precisely as
provided for herein and shall not be deemed to be waivers of, amendments of,
consents to or modifications of any term or provision of the Loan Documents or
any other document or instrument referred to therein or of any transaction or
further or future action on the part of the Borrower requiring the consent of
the Agent or the Majority Lenders except to the extent specifically provided for
herein. The Agent and the Lenders have not and shall not be deemed to have
waived any of their rights and remedies against the Borrower for any existing or
future Defaults or Events of Default.
26. Representations and Warranties. The Borrower represents and
------------------------------
warrants to the Lenders (which representations and warranties shall survive the
execution and delivery of this Amendment No. 5) that:
(a) The Borrower has taken all necessary action to authorize the
execution, delivery and performance of this Amendment No. 5, the Amended Notes
and any other documents required in connection with this Amendment No. 5
(collectively, the "ADDITIONAL LOAN DOCUMENTS");
(b) The Additional Loan Documents have been duly executed and
delivered and constitute the valid and legally binding obligations of the
Borrower, enforceable in accordance with their respective terms;
(c) No consent or approval of any person, firm, corporation or
entity, and no consent, license, approval or authorization of any governmental
authority is or will be required in connection with the execution, delivery,
performance, validity or enforcement of the Additional Loan Documents;
12
<PAGE>
(d) The Borrower is in full compliance with all of the various
covenants and agreements set forth in the Credit Agreement and each other Loan
Document;
(e) No event has occurred and is continuing which constitutes or
would constitute, with the giving of notice or lapse of time or both, a Default
or an Event of Default under the Credit Agreement or the other Loan Documents,
or, assuming the effectiveness of this Amendment No. 5, under the Credit
Agreement as amended by this Amendment No. 5; and
(f) All representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all material
respects as of the date hereof as though made on and as of the date hereof
(except insofar as such representations and warranties relate expressly to an
earlier date, in which case such representations and warranties shall be true
and correct in all material respects as of such date).
27. Counterparts. This Amendment No. 5 may be executed in
------------
counterparts, each of which shall be an original, and all of which, taken
together, shall constitute a single instrument.
28. GOVERNING LAW. THIS AMENDMENT NO. 5 SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 5 as
of the date first above-written.
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By: /s/ Kirk A. Collamer
-------------------------------------
Name: Kirk A. Collamer
Title: Vice President, Finance
and Administration
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, Individually
and as Agent
By: ________________________________________
Name:
Title:
By: ________________________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: ________________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 5 as
of the date first above-written.
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:
______________________________________
Name:
Title:
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, Individually
and as Agent
By: /s/ Jeffrey W. Wald
---------------------------------------------
Name: Jeffrey W. Wald
Title: Vice-President
By: /s/ Ruth Y. Webster
---------------------------------------------
Name: Ruth Y. Webster
Title: Assistant Treasurer
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: ________________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 5 as
of the date first above-written.
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:
______________________________________
Name:
Title:
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, Individually
and as Agent
By:
____________________________________________
Name:
Title:
By: ____________________________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/ John Lanier
--------------------------------------------
Name: John Lanier
Title: Vice President
<PAGE>
EUROPEAN AMERICAN BANK
By: /s/ Brian A. Foster
--------------------------------
Name: Brian A. Foster
Title: Vice President
FLEET NATIONAL BANK
By: ___________________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY
By: ___________________________________
Name:
Title:
<PAGE>
EUROPEAN AMERICAN BANK
By: ____________________________________
Name:
Title:
FLEET NATIONAL BANK
By: /s/ Jeffery R. Greene
------------------------------------
Name: Jeffery R. Greene
Title: Relationship Manager
By: /s/ Alexander G. Ivanov
-----------------------------------
Name: Alexander G. Ivanov
Title: Banking Officer
IBJ SCHRODER BANK & TRUST COMPANY
By: ____________________________________
Name:
Title:
<PAGE>
EUROPEAN AMERICAN BANK
By: ____________________________________
Name:
Title:
FLEET NATIONAL BANK
By: ____________________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY
By: [SIGNATURE ILLEGIBLE]
------------------------------------
Name: [SIGNATURE ILLEGIBLE]
Title: Vice-President
<PAGE>
WAIVER, dated as of July 31, 1995 to the AMENDED AND RESTATED CREDIT
AGREEMENT (the "Credit Agreement"), dated as of September 4, 1992, and amended
and restated as of January 31, 1994, as further amended, among Muzak Limited
Partnership, a Delaware limited partnership (the "Borrower"), the Lenders
parties thereto (the "Lenders") and Union Bank of Switzerland, New York Branch,
as agent for the Lenders (in such capacity, the "Agent"). Unless otherwise
specifically defined herein, all capitalized terms used herein shall have the
respective meanings ascribed to such terms in the Credit Agreement.
WHEREAS, the Borrower desires to enter into a joint venture agreement
with ALCAS HOLDINGS B.V., a Netherlands corporation, in the form attached hereto
as Exhibit A (the "Joint Venture"), pursuant to which the parties shall
establish a Netherlands corporation (the "Company") to engage in the production
and distribution of music, advertising, data, visual merchandising and business
television throughout Europe.
WHEREAS, pursuant to the Joint Venture, the Borrower has agreed to
make capital investments in the Company of up to $600,000 (the "Joint Venture
Investments").
WHEREAS, the Borrower has requested that the Majority Lenders waive
compliance by the Borrower with Section 10.4 of the Credit Agreement in order to
consummate the Joint Venture and fund the Joint Venture Investments.
NOW THEREFORE, the parties hereto agree as follows:
1. The Majority Lenders hereby waive compliance by the Borrower with
Section 10.4 of the Credit Agreement solely with respect to the consummation of
the Joint Venture and funding of the Joint Venture Investments; provided, that
--------
the aggregate amount of all present and future Investments made by the Borrower
in the Company, including the Joint Venture Investments, shall not exceed
$600,000.
2. This Waiver shall be applicable solely to the matters specified in
paragraph 1 hereof.
3. The Borrower represents and warrants that, after giving effect to
this Waiver, no Default or Event of Default is continuing under the Credit
Agreement.
4. This Waiver shall be deemed effective only upon due execution and
delivery of counterparts of this Waiver to the Agent by each of the parties
signatory hereto.
5. This Waiver shall be governed by the internal laws of the State of
New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed by their respective officers thereunder duly authorized as of the
date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By: /s/ Jeffery W. Wald
--------------------------------
Name: Jeffery W. Wald
Title: Vice-President
By: /s/ Ruth Y. Webster
--------------------------------
Name: Ruth Y. Webster
Title: Assistant Treasurer
EUROPEAN AMERICAN BANK, as a Lender
By: _______________________________
Name:
Title:
FLEET NATIONAL BANK, as a Lender
By: _______________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST
COMPANY, as a Lender
By: _______________________________
Name:
Title:
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed by their respective officers thereunder duly authorized as of the
date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By: _______________________________
Name:
Title:
By: _______________________________
Name:
Title:
EUROPEAN AMERICAN BANK, as a Lender
By: /s/ Brian A. Foster
---------------------------------
Name: Brian A. Foster
Title: Assistant Vice President
FLEET NATIONAL BANK, as a Lender
By: _______________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST
COMPANY, as a Lender
By: _______________________________
Name:
Title:
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed by their respective officers thereunder duly authorized as of the
date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By: _______________________________
Name:
Title:
By: _______________________________
Name:
Title:
EUROPEAN AMERICAN BANK, as a Lender
By: _______________________________
Name:
Title:
FLEET NATIONAL BANK, as a Lender
By: /s/ Jeffrey R. Greene
---------------------------------
Name: Jeffrey R. Greene
Title: Banking Officer
IBJ SCHRODER BANK & TRUST
COMPANY, as a Lender
By: _______________________________
Name:
Title:
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed by their respective officers thereunder duly authorized as of the
date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By: _______________________________
Name:
Title:
By: _______________________________
Name:
Title:
EUROPEAN AMERICAN BANK, as a Lender
By: _______________________________
Name:
Title:
FLEET NATIONAL BANK, as a Lender
By: _______________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST
COMPANY, as a Lender
By: /s/ Thomas H. Vogel
--------------------------------
Name: Thomas H. Vogel
Title: Vice President
2
<PAGE>
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By: /s/ John N. Lanier
--------------------------------
Name: John N. Lanier
Title: Vice President
MUZAK LIMITED PARTNERSHIP
By: _______________________________
Name:
Title:
3
<PAGE>
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By: _______________________________
Name:
Title:
MUZAK LIMITED PARTNERSHIP
By: /s/ Kirk A. Collamer
----------------------------------
Name: Kirk A. Collamer
Title: Vice President
Finance & Administration
3
<PAGE>
WAIVER, dated as of January 10, 1995 to the AMENDED AND RESTATED
CREDIT AGREEMENT (the "CREDIT AGREEMENT"), dated as of September 4, 1992, as
amended and restated as of January 31, 1994, and as amended as of October 31,
1994, as of November 2, 1994, as of November 4, 1994, and as of November 17,
1994, among Muzak Limited Partnership, a Delaware limited partnership (the
"BORROWER"), the Lenders parties thereto (the "LENDERS") and Union Bank of
Switzerland, New York Branch, as agent for the Lenders (in such capacity, the
"AGENT"). Unless otherwise specifically defined herein, all capitalized terms
used herein shall have the respective meanings ascribed to such terms in the
Credit Agreement.
WHEREAS, the Borrower desires to (i) sell the assets set forth in the
draft letter (with attachments) attached hereto as Exhibit A, in the manner
described therein (the "DESIGNATED TRANSACTION") and (ii) use the Net Proceeds
from the Designated Transaction to prepay a portion of the outstanding principal
of the Revolving Advances.
WHEREAS, the Borrower has requested that the Majority Lenders waive
compliance by the Borrower with (i) Section 10.5 of the Credit Agreement in
order to consummate the Designated Transaction and (ii) Section 3.1(c) of the
Credit Agreement in order to allow the Borrower to use the Net Proceeds from the
Designated Transaction to prepay a portion of the outstanding principal of the
Revolving Advances.
NOW THEREFORE, the parties hereto agree as follows:
1. The Majority Lenders hereby waive compliance by the Borrower with
Section 10.5 of the Credit Agreement solely with respect to the consummation of
the Designated Transaction.
2. The Majority Lenders hereby waive compliance by the Borrower with
Section 3.1(c) of the Credit Agreement solely with respect to the application of
the Net Proceeds from the Designated Transaction; provided, that, concurrently
--------
with the receipt thereof, such Net Proceeds shall be delivered to the Agent as
prepayment of a portion of the outstanding principal of the Revolving Advances.
3. This Waiver shall be applicable solely to the matters specified in
paragraphs 1 and 2 hereof.
4. The Borrower represents and warrants that no Default or Event of
Default is continuing under the Credit Agreement.
5. This Waiver shall be deemed effective only upon due execution and
delivery of counterparts of this Waiver to the Agent by each of the parties
signatory hereto.
6. This Waiver shall be governed by the internal laws of the State of
New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed by their respective officers thereunder duly authorized as of the
date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By: /s/ Jeffrey W. Wald
-----------------------------
Name: Jeffrey W. Wald
Title: Vice-President
By: /s/ Ruth Y. Webster
-----------------------------
Name: Ruth Y. Webster
Title: Assistant Treasurer
EUROPEAN AMERICAN BANK, as a Lender
By:
_____________________________
Name:
Title:
FLEET NATIONAL BANK, as a Lender
By:
_____________________________
Name:
Title:
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed by their respective officers thereunder duly authorized as of the
date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as Lender
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
EUROPEAN AMERICAN BANK, as a Lender
By:/s/ Bryan A. Foster
-----------------------
Name: BRYAN A. FOSTER
Title: ASSISTANT VICE PRESIDENT
FLEET NATIONAL BANK, as a Lender
By:_______________________
Name:
Title:
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed by their respective officers thereunder duly authorized as of the
date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as Lender
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
EUROPEAN AMERICAN BANK, as a Lender
By:_______________________
Name:
Title:
FLEET NATIONAL BANK, as a Lender
By: /s/ James P. Miller
-----------------------
Name: James P. Miller
Title: Vice President
<PAGE>
IBJ SCHRODER BANK & TRUST
COMPANY, as a Lender
By: /s/ Thomas H. Vogel
-----------------------
Name: THOMAS H. VOGEL
Title: VICE PRESIDENT
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By:_______________________
Name:
Title:
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.
its managing general partner
By: Music Holdings Corp.,
its general partner
By: /s/ W. R. Borgeson
-----------------------
Name: W. R. BORGESON
Title: VICE PRESIDENT
3
<PAGE>
IBJ SCHRODER BANK & TRUST
COMPANY, as a Lender
By:_____________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By: /s/ James Latimer
-----------------------
Name: JAMES LATIMER
Title: MANAGING DIRECTOR
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:_______________________
Name:
Title:
3
<PAGE>
AMENDMENT NO. 4 TO AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------------------------
AMENDMENT NO. 4, dated as of November 17, 1994, to the AMENDED AND
RESTATED CREDIT AGREEMENT (the "CREDIT AGREEMENT"), dated as of January 31,
1994, and as amended as of October 31, 1994, as of November 2, 1994 and as of
November 4, 1994, among MUZAK LIMITED PARTNERSHIP, a Delaware limited
partnership (the "BORROWER"), UNION BANK OF SWITZERLAND, NEW YORK BRANCH ("UBS")
and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION ("ING"), as Lenders
(the "LENDERS") and UNION BANK OF SWITZERLAND, NEW YORK BRANCH, as agent for the
Lenders (in such capacity, the "AGENT"), and agreed to and accepted by European
American Bank and Fleet National Bank (the "ADDITIONAL LENDERS"). Unless
otherwise specifically defined herein, all capitalized terms used herein shall
have the respective meanings ascribed to such terms in the Credit Agreement.
The Borrower, UBS, ING and the Agent are parties to the Credit
Agreement, pursuant to which UBS and ING have advanced Loans to the Borrower
upon the terms and subject to the conditions set forth therein.
Each of UBS and ING are, on the date hereof, selling, assigning and
transferring to the Additional Lenders, and the Additional Lenders are assuming,
certain of UBS's and ING's interests in the Revolving Credit Facility Commitment
and the Aggregate Term Loan Commitments. As a result of such sale, assignment
and transfer, and in order to effectuate certain other changes, the parties
hereto desire that the Credit Agreement be amended by this Amendment No. 4.
ACCORDINGLY, the parties hereto agree as follows:
1. Section 1.1 of the Credit Agreement is hereby amended by deleting the
defined term "Majority Lenders" in its entirety and substituting therefor the
following:
"MAJORITY LENDERS" shall mean at any time, Lenders holding more
than fifty percent (50%) of the sum of (i) the aggregate outstanding
principal balance of the Loans, (ii) the Letters of Credit (which shall be
deemed to be held by the Lenders in accordance with their exposure under
Section 13.17 hereof), and (iii) the aggregate amount of unutilized
Commitments of the Lenders, in each case, at such time.
2. Schedules 1-d and 2.2 of the Credit Agreement are hereby amended
by deleting such Schedules in their entirety and substituting therefor Schedules
1-d and 2.2 attached hereto.
3. The Borrower, UBS, ING and the Agent hereby acknowledge and agree
that the Additional Lenders hereby have become and shall be deemed Lenders under
the Credit Agreement and that any and all references to the Lenders contained in
the Credit Agreement shall include the Additional Lenders. The Additional
Lenders agree to be bound by the terms and conditions of the Credit Agreement
and the Borrower, UBS, ING, the Agent and the Additional Lenders agree that the
Additional Lenders shall have all of the rights, remedies and obligations of
Lenders under the Credit Agreement to the extent of their interests therein.
<PAGE>
4. The Credit Agreement, as amended hereby, is hereby ratified and
confirmed and, except as hereinabove agreed, shall remain in full force and
effect in accordance with its terms.
5. This Amendment No. 4 may be executed in counterparts, each of
which shall be an original, and all of which, taken together, shall constitute a
single instrument.
6. This Amendment No. 4 shall be governed by, and construed in
accordance with, the internal laws of the State of New York.
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By: /s/ Mark Jennings
-------------------------
Name: Mark Jennings
Title: Vice President
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, Individually
and as Agent
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By:_____________________________
Name:
Title:
2
<PAGE>
4. The Credit Agreement, as amended hereby, is hereby ratified and
confirmed and, except as hereinabove agreed, shall remain in full force and
effect in accordance with its terms.
5. This Amendment No. 4 may be executed in counterparts, each of
which shall be an original, and all of which, taken together, shall constitute a
single instrument.
6. This Amendment No. 4 shall be governed by, and construed in
accordance with, the internal laws of the State of New York.
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:_________________________
Name:
Title:
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, Individually
and as Agent
By: /s/ Jeffrey W. Wald
-----------------------------
Name: Jeffrey W. Wald
Title: Vice-President
By: /s/ Ruth Y. Webster
------------------------------
Name: Ruth Y. Webster
Title: Assistant Treasurer
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By:______________________________
Name:
Title:
2
<PAGE>
4. The Credit Agreement, as amended hereby, is hereby ratified and
confirmed and, except as hereinabove agreed, shall remain in full force and
effect in accordance with its terms.
5. This Amendment No. 4 may be executed in counterparts, each of
which shall be an original, and all of which, taken together, shall constitute a
single instrument.
6. This Amendment No. 4 shall be governed by, and construed in
accordance with, the internal laws of the State of New York.
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:_________________________
Name:
Title:
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, Individually
and as Agent
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/ James W. Latimer
------------------------------
Name: James W. Latimer
Title: Managing Director
2
<PAGE>
Accepted and Agreed:
- -------------------
EUROPEAN AMERICAN BANK
By: [SIGNATURE ILLEGIBLE]
-----------------------------
Name:[ILLEGIBLE]
Title: Assistant Vice President
FLEET NATIONAL BANK
By:_____________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY
By:_____________________________
Name:
Title:
3
<PAGE>
Accepted and Agreed:
- -------------------
EUROPEAN AMERICAN BANK
By: [SIGNATURE ILLEGIBLE]
-----------------------------
Name:
Title:
FLEET NATIONAL BANK
By: [SIGNATURE ILLEGIBLE]
-----------------------------
Name:
Title: Vice President
By: [SIGNATURE ILLEGIBLE]
-----------------------------
Name:
Title: Vice President
IBJ SCHRODER BANK & TRUST COMPANY
By:_____________________________
Name:
Title:
3
<PAGE>
Accepted and Agreed:
- -------------------
EUROPEAN AMERICAN BANK
By:_____________________________
Name:
Title:
FLEET NATIONAL BANK
By:_____________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Thomas H. Vogel
-----------------------------
Name: Thomas H. Vogel
Title: Vice Presideent
3
<PAGE>
AMENDMENT NO. 3 AND CONSENT
---------------------------
AMENDMENT NO. 3 AND CONSENT ("AMENDMENT NO. 3"), dated as of November
4, 1994, to the AMENDED AND RESTATED CREDIT AGREEMENT (the "CREDIT AGREEMENT"),
dated as of January 31, 1994, and as amended as of October 31, 1994 and as of
November 2, 1994, among MUZAK LIMITED PARTNERSHIP, a Delaware limited
partnership (the "BORROWER"), UNION BANK OF SWITZERLAND, NEW YORK BRANCH ("UBS")
and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, as Lenders (the
"LENDERS") and UNION BANK OF SWITZERLAND, NEW YORK BRANCH, as agent for the
Lenders (in such capacity, the "AGENT"). Unless otherwise specifically defined
herein, all capitalized terms used herein shall have the respective meanings
ascribed to such terms in the Credit Agreement.
WHEREAS, the Borrower intends to repay on the date hereof all of the
Guaranteed Loan Obligations (as defined in the Guaranteed Note).
WHEREAS, the parties hereto desire that the Credit Agreement be
amended by this Amendment No. 3.
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment of Section 1.1. (a) Section 1.1 of the Credit Agreement
------------------------
is hereby amended by deleting the definitions of "Affiliate", "Management
Notes", "Option Agreements", "Partnership Interests", "Special Subordinated
Takeout Financing", "Specified Transactions", "Subordinated Loan Agreement" and
"Subordinated Notes" contained therein in their entirety and substituting
therefor, in then appropriate alphabetical order, the following:
"AFFILIATE" of any specified Person shall mean any other
Person directly or indirectly controlling or controlled by or under
common control with such specified Person or which is a director,
officer or partner (limited or general) of such specified Person. For
the purposes of this definition, "control," when used with respect to
any specified Person, means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing. For the purposes of this
definition (and without limiting such definition in any manner), each
of the Partners (other than UBS and its Affiliates, Barclays and its
Affiliates, Exeter and its Affiliates, The Field Corporation and its
Affiliates, the Transferors and their respective Affiliates, and any
other Lender and its Affiliates), their respective Affiliates and the
officers and directors of the Borrower shall be deemed to control the
Borrower and its Subsidiaries and shall be an Affiliate of the
Borrower and its Subsidiaries.
"MANAGEMENT NOTES" shall mean, collectively, promissory
notes in an aggregate principal amount not to exceed $650,000, in
substantially the form attached hereto as Exhibit 1-m, representing
indebtedness payable to the Borrower by certain members of Muzak
Management with respect to loans made by the
<PAGE>
Borrower on or following the Closing Date to facilitate the purchase
of Partnership Interests which management notes shall have a final
maturity of not later than December 31, 1998, all as reflected on
Schedule 1-e hereto.
"OPTION AGREEMENTS" shall mean that certain Option Agreement
and the related Letter Agreement and Indemnity Letter, dated the
Closing Date, as amended as of November 4, 1994, between Barclays and
the Borrower, pursuant to which (i) the Borrower shall have the right
to put to Barclays, (ii) Barclays shall have the right to call from
the Borrower, 1,529,898 units of Partnership Interests in the form of
Class A-2 Partnership Interests, and (iii) Barclays shall be granted
certain other rights, including certain registration rights with
respect to Partnership Interests that it may hold, which agreements
shall be substantially in form attached hereto as Exhibit 1-o.
"PARTNERSHIP INTERESTS" shall mean the General Partnership
Interests, the Class A-1 Partnership Interests, the Class A-2
Partnership Interests, the Class B Partnership Interests, the Class C
Partnership Interests, the Class C-1 Partnership Interests and the
Preferred Partnership Interests.
"SPECIAL SUBORDINATED TAKEOUT FINANCING" shall mean an
issuance by the Borrower, at any time on or prior to the Guaranteed
Loan Maturity Date of (A) up to $5,000,000 principal amount of
subordinated debt (which indebtedness shall not (i) accrue cash
interest in excess of 12.5% per annum, (ii) provide for the payment of
any portion of the principal thereunder prior to 6 years and 10 months
from the date of issuance, or (iii) rank higher than pari passu in
priority with the Subordinated Notes (the "SPECIAL SUBORDINATED
DEBT")), and (B) any equity interest of the Borrower (whether by
direct issuance or by virtue of rights, warrants, options, puts,
calls, or other like arrangements) (other than an Initial Equity
Issuance) and that does not require cash payments with respect thereto
during the term of this Agreement, whether by dividend, interest or
otherwise, of which the full cash purchase price of such Special
Subordinated Takeout Financing shall be applied in the manner set
forth in Section 3.1(g) hereof (and subject to specified circumstances
and pursuant to the terms and conditions set forth in the Guaranteed
Note and the Put and Call), all on terms and conditions, and pursuant
to documentation, reasonably satisfactory to the Borrower and the
Agent.
"SPECIFIED TRANSACTIONS" shall mean and include: (1) non-
cash payments of distributions on the Class C Partnership Interests;
(2) the conversion of the Class C Partnership Interests into Class C
Exchange Notes pursuant to Section 16.02 of the Partnership Agreement
and the accrual of non-cash interest thereon; (3) non-cash payments of
distributions on the Class C-1 Partnership Interests and mandatory
cash payments of distributions on the Class C-1 Exchange Notes as
provided in Section 17.02(a) of the Partnership Agreement; (4) the
conversion of the Class C-1 Partnership Interests into Class C-1
Exchange Notes pursuant to Section 17.02 of the Partnership Agreement
and the accrual of non-cash interest thereon; (5) the issuance of the
Class C-1 Participation Option
2
<PAGE>
as provided (and as defined) in Section 17.02 of the Partnership
Agreement and the issuance of the Class C-1 Partnership Interests upon
the exercise thereof; (6) the reclassification (including an
adjustment in the number) of Class C-1 Partnership Interests upon the
occurrence of a Class C-1 Participation Event (as such term is defined
in the Partnership Agreement); (7) the issuance of Earn-out Notes
pursuant to Section 2.5 of the Purchase Agreement and the accrual of
non-cash interest thereon; (8) the issuance and exercise of Class B
Partnership Interest options, and the issuance of Class B Partnership
Interests upon the exercise thereof, to Muzak Management pursuant to
the Management Option Plan; (9) the issuance of the Management Notes;
(10) the issuance of Class A-2 Partnership Interests to Barclays (or
an Affiliate of Barclays) or Exeter (or an Affiliate of Exeter)
pursuant to the Option Agreements; (11) the purchase by the Borrower
of Class B Partnership Interests from former members of Muzak
Management (or their permitted transferees) and the settlement of
options held by Muzak Management, in each case for cash (only if no
Default or Event of Default is continuing or would occur as a result
of making such cash payment and subject in all cases to the prior or
simultaneous payment of all amounts due from the applicable employee
under his or her respective Management Notes, which Management Notes
shall be satisfied in full prior to any payment of any cash in respect
of the settlement of options or purchase of Class B Partnership
Interests from such employee) (provided that, to the extent any member
of Muzak Management, within 20 days of the settlement in cash of his
or her options, utilizes such cash to purchase Class B Partnership
Interests in the Borrower, such cash amount need not be applied to
such person's Management Notes) or in "Permitted Securities" (as
defined in the Partnership Agreement), all under this clause (11) in
an aggregate cost (together with all amounts loaned by the Borrower
pursuant to clause (12) below in such twelve month period) not to
exceed $500,000 in any twelve month period; (12) so long as no Default
or Event of Default is continuing, a loan or loans by the Borrower to
the Administrative General Partner of funds pursuant to Section
11.14(d) of the Partnership Agreement (as in effect on the New Closing
Date) under this clause (12) in an aggregate amount (together with all
amounts loaned by the Borrower pursuant to clause (11) above in such
twelve month period) not to exceed $500,000 in any twelve month
period; and (13) the conversion of the Preferred Partnership Interests
into Class B Partnership Interests pursuant to Section 19.05 of the
Partnership Agreement and the accrual of (but not any cash or other
payment with respect to) the Preferential Return (as defined in the
Partnership Agreement).
"SUBORDINATED LOAN AGREEMENT" shall mean that certain
Subordinated Loan Agreement, dated as of the Closing Date, between the
Borrower and Barclays, as such document may be amended, supplemented
or otherwise modified from time to time in accordance with its terms
and in accordance with Section 10.12 hereof.
"SUBORDINATED NOTES" shall mean the Borrower's senior
subordinated notes, in the form of Exhibit 1-r hereto, in the original
principal amount of $12,500,000, issued by the Borrower initially to
Barclays, together with
3
<PAGE>
any amendment, modification, renewal or substitution of any thereof
issued pursuant to and governed by the Subordinated Loan Documents.
(b) Section 1.1 of the Credit Agreement is hereby amended by adding,
in the appropriate alphabetical order, the following defined terms:
"EXETER" shall mean Exeter Venture Lenders, L.P.
"ING" shall mean Internationale Nederlanden (U.S.) Finance
Corporation.
"PREFERRED PARTNERSHIP INTERESTS" shall mean the preferred
limited partnership interests of the Borrower issued pursuant to the
Partnership Agreement and held as of November 4, 1994 by Centre
Partners Entities, UBS (or an Affiliate), Exeter (or an Affiliate),
John A. Hawkins and certain members of Muzak Management.
2. Amendment to Section 3.1. Section 3.1(g) of the Credit Agreement
------------------------
is hereby amended in its entirety to read as follows:
(g) SPECIAL SUBORDINATED TAKEOUT FINANCING. Until such time
as there shall be outstanding no Loans and no Commitments, and the
Letter of Credit Usage shall be zero, the Borrower shall pay and there
shall become due and payable, concurrently with the receipt of Net
Proceeds with respect to any Special Subordinated Takeout Financing, a
prepayment (without premium or penalty) in respect of the Lender Debt
and other Indebtedness equal to the Net Proceeds of such Issuance or
Extraordinary Receipt, such prepayment to be applied to the Guaranteed
Loan until all `Guaranteed Loan Obligations' (as such term is defined
in the Guaranteed Note) have been paid in full, and any Net Proceeds
remaining thereafter with respect to such Special Subordinated Takeout
Financing may be retained by the Borrower.
3. Amendment to Section 5.8. Section 5.8 of the Credit Agreement is
hereby amended in its entirety to read as follows:
(S) 5.8 Pledge of Equity Interests. MLP Acquisition, L.P.,
--------------------------
MLP Corp., each holder of Class A-1 Partnership Interests, Class B
Partnership Interests and Preferred Partnership Interests (in each
case, other than UBS (or an Affiliate), ING (or an Affiliate) Exeter
(or an Affiliate) or John A. Hawkins), and, to the extent that any
Subsidiary is created by the Borrower in accordance with the terms
hereof, the Borrower, shall each promptly and duly execute and deliver
to the Agent the certificates of partnership interests, together with
one or more pledge agreements and endorsements in blank, substantially
in the form of Exhibit 5.8 hereto, as applicable (each as amended,
supplemented or otherwise modified from time to time in accordance
with its terms, a "PLEDGE AGREEMENT"), covering, to the extent of its
interest therein, (i) all equity interests in the Borrower (other than
the Class A-2 Partnership Interests, the Class C
4
<PAGE>
Partnership Interests and the Preferred Partnership Interests (and,
upon conversion thereof, the Class B Partnership Interests) held as of
November 4, 1994 by UBS (or an Affiliate), ING (or an Affiliate),
Exeter (or an Affiliate) or John A. Hawkins, (ii) all equity interests
in MLP Communications Company, (iii) all equity interests (corporate
or partnership) now existing or hereafter issued in each present and
future Subsidiary of the Borrower, and (iv) all proceeds thereof,
pursuant to which such Persons shall grant to the Agent for the
benefit of the Agent and the Lenders a valid, perfected and
enforceable first priority Lien on all of the foregoing, together with
certificates representing the equity interests or capital stock
referred to therein, accompanied by undated stock powers or
assignments thereof executed in blank.
4. Amendment to Section 10.1. Section 10.1(a) of the Credit
-------------------------
Agreement is hereby amended by deleting the figure "7,250,000" appearing
opposite the year "1994" in the table contained therein, and substituting
therefor the figure "9,250,000".
5. Amendment to Schedule 1-e. Schedule 1-e to the Credit Agreement
-------------------------
is hereby amended by replacing the existing Schedule 1-e with the attached
Schedule 1-e.
6. Amendment to Schedule 12.1(c). Schedule 12.1(c) to the Credit
-----------------------------
Agreement is hereby amended by replacing the existing Schedule 12.1(c) with the
attached Schedule 12.1(c).
7. Consent. As required pursuant to Sections 10.12 and 10.13 of the
-------
Credit Agreement, the Lenders hereby consent to (i) the entering into of the
Third Amended and Restated Agreement of Limited Partnership of the Borrower,
substantially in the form attached hereto as Exhibit A (the "PARTNERSHIP
AGREEMENT AMENDMENT"), (ii) the amendment of the Subordinated Loan Agreement and
those other Subordinated Loan Documents, each in the form attached hereto as
Exhibit B (the "SUBORDINATED LOAN DOCUMENT AMENDMENTS") and (iii) the issuance
of Management Notes in connection with the purchase by members of Muzak
Management of Preferred Partnership Interests on the date hereof and the
entering into of new pledge agreements and/or the amendment of existing pledge
agreements in connection therewith. Furthermore, the Lenders hereby consent to
the execution, delivery and performance of that certain Agreement, dated as of
the date hereof, among the Borrower, Exeter and Barclays, contemplating, among
other things, Exeter's participation interest in certain Subordinated Loan
Documents, a copy of which is attached hereto as Exhibit C.
8. Acknowledgment. The Agent hereby acknowledges that the issuance
--------------
of (i) the Special Subordinated Debt and (ii) the equity interests in the
Borrower subscribed for pursuant to the Subscription Agreements dated the date
hereof between the Borrower and each holder of Preferred Partnership Interests
on the date hereof, upon application of the proceeds of such issuance in
accordance with Section 3.1(g) of the Credit Agreement, shall constitute a
Special Subordinated Takeout Financing.
9. Conditions Precedent. Notwithstanding any other provisions of
--------------------
this Amendment No. 3 or the Loan Documents, this Amendment No. 3 shall not
become effective unless and until the following conditions precedent shall have
occurred:
5
<PAGE>
(a) the Agent shall have received this Amendment No. 3, executed
and delivered by a duly authorized officer or partner of each party to the
Credit Agreement;
(b) the Agent shall have received the Partnership Agreement
Amendment, executed and delivered by a duly authorized officer or partner
of or signatory for each party thereto;
(c) the Agent shall have received the Subordinated Loan Document
Amendments, executed and delivered by a duly authorized officer or partner
of each party thereto, in each case in form and substance satisfactory to
the Agent;
(d) the Agent shall have received evidence, in form and
substance satisfactory to it, that the Borrower shall have paid in full all
Guaranteed Loan Obligations outstanding as of the date hereof;
(e) the Agent shall have received evidence, in form and
substance satisfactory to it, that the Borrower shall have received not
less than $7,000,000 in cash as the net proceeds of the issuance of units
of Preferred Partnership Interest;
(f) the Agent shall have received an opinion, dated the date
hereof, of Rosenman & Colin, special New York counsel to the Borrower, in
substantially the form of Exhibit B hereto;
(g) the Agent shall have received (i) amended Schedules to the
Pledge Agreement between MLP and the Agent and (ii) initial transaction
statements, executed by the Borrower, with respect to the units of
Preferred Partnership Interest purchased by MLP;
(h) the Agent shall have received (i) amended Schedules to the
Pledge Agreements between each member of Muzak Management purchasing units
of Preferred Partnership Interest and the Agent and (ii) initial
transaction statements, executed by the Borrower, with respect to the units
of Preferred Partnership Interest purchased by such members of Muzak
Management; and
(i) the Agent shall have received evidence satisfactory to it
that all fees, costs and expenses of counsel to the Agent and to UBS
relating to the transactions contemplated by this Amendment No. 3 billed on
or prior to the date hereof shall have been paid in full.
10. No Waiver. Except as expressly amended and waived hereby, all of
---------
the representations, warranties, terms, covenants and conditions of the Loan
Documents shall remain in full force and effect in accordance with their
respective terms. The amendments and waivers set forth herein shall be limited
precisely as provided for herein and shall not be deemed to be waivers of,
amendments of, consents to or modifications of any term or provision of the Loan
Documents or any other document or instrument referred to therein or of any
transaction or further or future action on the part of the Borrower requiring
the consent of the Agent or the Majority Lenders except to the extent
specifically provided for herein. The Agent and the
6
<PAGE>
Lenders have not and shall not be deemed to have waived any of their rights and
remedies against the Borrower for any existing or future Defaults or Events of
Default except as specifically set forth herein.
11. No Defaults. The Borrower represents and warrants that, after
-----------
giving effect to this Amendment No. 3, the Subordinated Loan Document Amendments
and the repayment of all amounts due and owing under the Guaranteed Note as of
the date hereof, no Default or Event of Default is continuing under the Credit
Agreement.
12. Counterparts. This Amendment No. 3 may be executed in
------------
counterparts, each of which shall be an original, and all of which, taken
together, shall constitute a single instrument.
13. GOVERNING LAW. THIS Amendment No. 3 SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 3 as
of the date first above-written.
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By: /s/ Mark E. Jennings
------------------------
Name: Mark E. Jennings
Title: Vice President
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By: /s/ Michael Greene
----------------------------
Name: Michael Greene
Title: First Vice President
By: /s/ Jeffrey W.Wald
----------------------------
Name: Jeffrey W. Wald
Title: Vice President
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By:____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 3 as
of the date first above-written.
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:________________________
Name:
Title:
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By:____________________________
Name:
Title:
By: ___________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By: /s/ James W. Latimer
----------------------------
Name: James W. Latimer
Title: Managing Director
<PAGE>
WAIVER AND AMENDMENT NO. 2, dated as of November 2, 1994, to the
AMENDED AND RESTATED CREDIT AGREEMENT (the "CREDIT AGREEMENT"), dated as of
January 31, 1994, among MUZAK LIMITED PARTNERSHIP, a Delaware limited
partnership (the "BORROWER"), UNION BANK OF SWITZERLAND, NEW YORK BRANCH ("UBS")
and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, as Lenders (the
"LENDERS") and UNION BANK OF SWITZERLAND, NEW YORK BRANCH, as agent for the
Lenders (in such capacity, the "AGENT"). Unless otherwise specifically defined
herein, all capitalized terms used herein shall have the respective meanings
ascribed to such terms in the Credit Agreement.
WHEREAS, in connection with the proposed repayment of Indebtedness
under the Guaranteed Loan on or about November 4, 1994, the Borrower has
requested that (i) UBS enter into Amendment No. 3 to the Guaranteed Note dated
the date hereof (in the form attached hereto, the "GUARANTEED NOTE AMENDMENT"),
which provides for an extension of the Guaranteed Loan Maturity Date until
November 4, 1994 and (ii) the definition of Guaranteed Loan Maturity Date under
the Credit Agreement be amended.
NOW THEREFORE, the parties hereto agree as follows:
1. Waiver. The Lenders hereby waive their rights under the Credit
------
Agreement solely with respect to and to the extent necessary to allow the
Borrower and UBS to enter into the Guaranteed Note Amendment.
2. Amendment. Section 1.1 of the Credit Agreement is hereby amended
---------
by deleting the date "November 2, 1994" in the definition of "Guaranteed Loan
Maturity Date" and substituting therefor the date "November 4, 1994".
3. This Waiver and Amendment No. 2 shall be applicable solely to the
matters specified in paragraphs 1 and 2 hereof.
4. The Borrower represents and warrants that no Default or Event of
Default is continuing under the Credit Agreement.
5. This Waiver and Amendment No. 2 shall be deemed effective only
upon due execution and delivery of counterparts of this Waiver and Amendment No.
2 to the Agent by each of the parties signatory hereto.
6. This Waiver and Amendment No. 2 shall be governed by the internal
laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Amendment No. 2 to be duly executed by their respective officers thereunder duly
authorized as of the date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By: [SIGNATURE ILLEGIBLE]
--------------------------
Name:
Title:
By: [SIGNATURE ILLEGIBLE]
--------------------------
Name: [ILLEGIBLE]
Title: First Vice President
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By:__________________________
Name:
Title:
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:_____________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Amendment No. 2 to be duly executed by their respective officers thereunder duly
authorized as of the date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By: James W. Latimer
--------------------------
Name: James W. Latimer
Title:MANAGING DIRECTOR
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:_____________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Amendment No. 2 to be duly executed by their respective officers thereunder duly
authorized as of the date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By:__________________________
Name:
Title:
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By: [SIGNATURE ILLEGIBLE]
----------------------
Name:
Title:V.P
<PAGE>
WAIVER AND AMENDMENT NO.1 ("WAIVER"), dated as of October 31, 1994, to
the AMENDED AND RESTATED CREDIT AGREEMENT (the "CREDIT AGREEMENT"), dated as of
January 31, 1994, among MUZAK LIMITED PARTNERSHIP, a Delaware limited
partnership (the "BORROWER"), UNION BANK OF SWITZERLAND, NEW YORK BRANCH ("UBS")
and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, as Lenders (the
"LENDERS") and UNION BANK OF SWITZERLAND, NEW YORK BRANCH, as agent for the
Lenders (in such capacity, the "AGENT"). Unless otherwise specifically defined
herein, all capitalized terms used herein shall have the respective meanings
ascribed to such terms in the Credit Agreement.
WHEREAS, in connection with the proposed repayment of Indebtedness
under the Guaranteed Loan on or about November 2, 1994, the Borrower has
requested that (i) UBS enter into Amendment No. 2 to the Guaranteed Note dated
the date hereof (in the form attached hereto, the "GUARANTEED NOTE AMENDMENT"),
which provides for an extension of the Guaranteed Loan Maturity Date until
November 2, 1994 and (ii) the definition of Guaranteed Loan Maturity Date under
the Credit Agreement be amended.
NOW THEREFORE, the parties hereto agree as follows:
1. Waiver. The Lenders hereby waive their rights under the Credit
------
Agreement solely with respect to and to the extent necessary to allow the
Borrower and UBS to enter into the Guaranteed Note Amendment.
2. Amendment. Section 1.1 of the Credit Agreement is hereby amended
---------
by deleting the date "October 31, 1994" in the definition of "Guaranteed Loan
Maturity Date" and substituting therefor the date "November 2, 1994".
3. This Waiver shall be applicable solely to the matters specified in
paragraphs 1 and 2 hereof.
4. The Borrower represents and warrants that no Default or Event of
Default is continuing under the Credit Agreement.
5. This Waiver shall be deemed effective only upon due execution and
delivery of counterparts of this Waiver to the Agent by each of the parties
signatory hereto.
6. This Waiver shall be governed by the internal laws of the State of
New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed by their respective officers thereunder duly authorized as of the
date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By: /s/ Jeffrey W. Wald
--------------------------
Name: Jeffrey W. Wald
Title: Vice-President
By: /s/ Mike Greene
--------------------------
Name: Mike Greene
Title: Managing Director
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By:__________________________
Name:
Title:
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:_____________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed by their respective officers thereunder duly authorized as of the
date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By: /s/ James W. Latimer
--------------------------
Name: James W. Latimer
Title: Managing Director
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:_____________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed by their respective officers thereunder duly authorized as of the
date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By:__________________________
Name:
Title:
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By: [SIGNATURE ILLEGIBLE]
-----------------------
Name:
Title: Vice President
<PAGE>
WAIVER AND AGREEMENT dated as of February 10, 1994, to the AMENDED
AND RESTATED CREDIT AGREEMENT (the "CREDIT AGREEMENT"), dated as of September 4,
1992, as amended as of October 22, 1992 and as of December 15, 1993, and as
AMENDED AND RESTATED as of January 31, 1994, among MUZAK LIMITED PARTNERSHIP, a
Delaware limited partnership (the "BORROWER"), UNION BANK OF SWITZERLAND, NEW
YORK BRANCH ("UBS") AND INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION
("ING"), as Lenders (the "LENDERS") and UNION BANK OF SWITZERLAND, NEW YORK
BRANCH, as agent for the Lenders (in such capacity, the "AGENT").
WHEREAS, the Borrower desires to enter into certain asset acquisitions
generally described on Exhibit A hereto for which the aggregate purchase price
shall not exceed $850,000 (the "DESIGNATED ACQUISITIONS").
WHEREAS, the Borrower has requested that the Lenders (i) waive
compliance by the Borrower of Section 10.4 of the Credit Agreement in order to
enter into agreements with respect to the Designated Acquisitions and to
consummate the Designated Acquisitions on terms substantially as set forth on
Exhibit A hereto, and (ii) agree that the Assets acquired pursuant to the
Designated Acquisitions be excluded in the calculation of Capital Expenditures
pursuant to Section 10.1 of the Credit Agreement.
NOW THEREFORE, the parties hereto agree as follows:
1. Unless otherwise specifically defined herein, all capitalized
terms used herein shall have the respective meanings ascribed to such terms in
the Credit Agreement.
2. The Lenders hereby (i) waive compliance by the Borrower with
Section 10.4 of the Credit Agreement solely with respect to the Borrower
entering into agreements with respect to the Designated Acquisitions and the
consummation the Designated Acquisitions on terms substantially as set forth on
Exhibit A hereto, and (ii) agree that the Assets acquired pursuant to the
Designated Acquisitions shall be excluded in the calculation of Capital
Expenditures pursuant to Section 10.1 of the Credit Agreement.
3. This Waiver shall be applicable solely to the matters specified in
paragraph 2 hereof.
4. The Borrower represents and warrants that no Default or Event of
Default is continuing under the Credit Agreement.
5. This Waiver and Agreement shall be deemed effective only upon due
execution and delivery of counterparts of this Waiver and Agreement to the Agent
by each of the parties signatory hereto.
6. This Waiver and Agreement shall be governed by the internal laws
of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Agreement to be duly executed by their respective officers thereunder duly
authorized as of the date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By: /s/ Charles J. Delaney
--------------------------
Charles J. Delaney
First Vice President
By: /s/ Michael Greene
--------------------------
Michael Greene
Vice President
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By:__________________________
Name:
Title:
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:_____________________
Name:
Title:
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Agreement to be duly executed by their respective officers thereunder duly
authorized as of the date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By:__________________________
Charles J. Delaney
First Vice President
By:__________________________
Michael Greene
Vice President
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By: /s/ T.S. Peterson
--------------------------
Name: Teresa S. Peterson
Title: Vice President
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By:_____________________
Name:
Title:
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Agreement to be duly executed by their respective officers thereunder duly
authorized as of the date first above written.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Agent and as a Lender
By:__________________________
Charles J. Delaney
First Vice President
By:__________________________
Michael Greene
Vice President
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as a Lender
By:__________________________
Name:
Title:
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By: /s/ W.R. Borgeson
---------------------
Name: W.R. BORGESON
Title: VICE PRESIDENT
2
<PAGE>
================================================================================
$54,600,000
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of September 4, 1992,
as amended as of
October 22, 1992
and as of
December 15, 1993
and as
AMENDED AND RESTATED
as of January 31, 1994
among
MUZAK LIMITED PARTNERSHIP,
as Borrower
UNION BANK OF SWITZERLAND, NEW YORK BRANCH,
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION,
and
THE OTHER LENDERS PARTIES HERETO,
as Lenders
and
UNION BANK OF SWITZERLAND, NEW YORK BRANCH,
as Agent
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS AND ACCOUNTING TERMS........................... 2
(S) 1.1. Certain Defined Terms...................................... 2
(S) 1.2. Terms Defined in the Uniform Commercial Code............... 31
(S) 1.3. Computation of Time Periods................................ 31
(S) 1.4. Accounting Terms........................................... 31
(S) 1.5. Other Provisions Regarding Definitions..................... 32
SECTION 2. AMOUNT AND TERMS........................................... 32
(S) 2.1. Revolving Advances......................................... 32
(S) 2.2. Revolving Credit Facility Commitment and
Borrowing Limit............................................ 33
(S) 2.3. Revolving Credit Facility Following a Takeout
Financing.................................................. 33
(S) 2.4. Revolving Notes............................................ 33
(S) 2.5. Term Loan; Term Loan Commitment; Availability.............. 34
(S) 2.6. Term Notes................................................. 34
(S) 2.7. Notice of Borrowing; Borrower's Certificate................ 34
(S) 2.8. Termination or Reduction of Revolving Credit
Facility Commitments
(S) 2.9. Interest................................................... 36
(S) 2.10. Conversion of Borrowings; Renewals........................ 37
(S) 2.11. Computation of Interest................................... 38
(S) 2.12. Increased Costs........................................... 39
(S) 2.13. Change of Law Rendering Eurodollar Advances
Unlawful.................................................. 39
(S) 2.14. Eurodollar Availability................................... 40
(S) 2.15. Indemnities............................................... 41
(S) 2.16. Disbursement.............................................. 43
(S) 2.17. Agent's Availability Assumption........................... 43
(S) 2.18. Pro Rata Treatment and Payments........................... 44
(S) 2.19. Eurodollar Offices........................................ 45
(S) 2.20. Telephonic Notice......................................... 45
(S) 2.21. Maximum Interest.......................................... 45
SECTION 3. PAYMENTS, PREPAYMENTS AND REDUCTIONS....................... 45
(S) 3.1. Mandatory Payments......................................... 45
(S) 3.2. Payment From Insurance Proceeds............................ 49
(S) 3.3. Optional Prepayments....................................... 50
(S) 3.4. Procedures for Payment..................................... 51
(S) 3.5. Commitment Fee............................................. 54
(S) 3.6. Other Fees................................................. 55
(S) 3.7. Prepayments to Include Interest............................ 55
SECTION 4. LETTERS OF CREDIT.......................................... 55
(S) 4.1. Letters of Credit.......................................... 55
(S) 4.2. Letter of Credit Fees...................................... 56
(S) 4.3. Indemnity.................................................. 56
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(S) 4.4. Reimbursement of Certain Costs............................. 57
(S) 4.5. Payment of Drafts.......................................... 58
(S) 4.6. Issuing Lender's Actions................................... 59
SECTION 5. SECURITY AND GUARANTY...................................... 59
(S) 5.1. Security Agreements........................................ 59
(S) 5.2. Security Agreement - Intellectual Property................. 61
(S) 5.3. Assignment of Life Insurance............................... 61
(S) 5.4. Real Property; Mortgages; Title Insurance.................. 61
(S) 5.5. Filing and Recording....................................... 62
(S) 5.6. Interpretation of Security Documents....................... 63
(S) 5.7. Guaranties................................................. 63
(S) 5.8. Pledge of Equity Interests................................. 63
(S) 5.9. Non-Recourse to Partners................................... 63
SECTION 6. CONDITIONS PRECEDENT TO INITIAL BORROWING AND
ISSUANCE OF LETTERS OF CREDIT.............................. 64
(S) 6.1. Opinions of Counsel........................................ 64
(S) 6.2. Financial Status........................................... 64
(S) 6.3. Qualification.............................................. 65
(S) 6.4. Security Documents and Instruments......................... 65
(S) 6.5. Guaranteed Note, Put and Call, and the Guaranteed
Loan Guarantees............................................ 65
(S) 6.6. Evidence of Insurance...................................... 65
(S) 6.7. Borrowing Certificates..................................... 66
(S) 6.8. The Original Notes and the Notes........................... 66
(S) 6.9. Accrued Interest on the Original Notes..................... 66
(S) 6.10. Comcast Acquisition....................................... 66
(S) 6.11. Confirmations with Respect to the Rollover
Letters of Credit......................................... 66
(S) 6.12. Financing and Increasing the Original Term
Loan and Original Revolving Advances...................... 67
(S) 6.13. Compliance with Law and Related Documents................. 67
(S) 6.14. FCC Matters and Compliance................................ 67
(S) 6.15. Payment of Indebtedness by the Transferors................ 67
(S) 6.16. Consent of Barclays as Holder of the
Subordinated Notes........................................ 67
(S) 6.17. Arrangement Among Investors; Capital Contribution......... 67
(S) 6.18. Examination of Books...................................... 68
(S) 6.19. Corporate Structure....................................... 68
(S) 6.20. Other Company Matters..................................... 68
(S) 6.21. Fees to Agent and Lenders................................. 68
(S) 6.22. Management................................................ 68
(S) 6.23. Disbursement Authorization................................ 68
(S) 6.24. Litigation................................................ 69
(S) 6.25. Compliance with Law....................................... 69
(S) 6.26. Proceedings; Receipt of Documents......................... 69
(S) 6.27. Projections, etc.......................................... 71
(S) 6.28. Accountant's Tax Letter................................... 71
(S) 6.29. Subordination Provisions.................................. 71
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(S) 6.30. Solvency.................................................. 72
(S) 6.31. Environmental Review...................................... 72
(S) 6.32. Appraisals................................................ 72
(S) 6.33. Title Insurance Endorsements.............................. 72
(S) 6.34. CCI and MLP Partnership Agreements........................ 72
(S) 6.35. Special Counsel Fees...................................... 73
SECTION 7. CONDITIONS PRECEDENT TO EACH BORROWING AND ISSUANCE OF
LETTERS OF CREDIT................................... 73
(S) 7.1. Borrower's Certificate; Other Conditions................... 73
(S) 7.2. Written Notice of Advance.................................. 73
SECTION 8. USE OF PROCEEDS............................................ 74
(S) 8.1. Use of Proceeds............................................ 74
SECTION 9. AFFIRMATIVE COVENANTS...................................... 74
(S) 9.1. Financial Statements and Other Information................. 74
(S) 9.2. Taxes and Claims........................................... 78
(S) 9.3. Insurance.................................................. 78
(S) 9.4. Books and Reserves......................................... 80
(S) 9.5. Properties in Good Condition............................... 80
(S) 9.6. Maintenance of Existence................................... 80
(S) 9.7. FCC Compliance............................................. 80
(S) 9.8. Inspection by the Agent and the Lenders.................... 82
(S) 9.9. Pay Indebtedness to Lenders and Perform Other
Covenants.................................................. 82
(S) 9.10. Notice of Default......................................... 82
(S) 9.11. Reporting of Misrepresentations........................... 83
(S) 9.12. Compliance with Laws...................................... 83
(S) 9.13. ERISA..................................................... 83
(S) 9.14. Further Assurances........................................ 85
(S) 9.15. Audits.................................................... 85
(S) 9.16. Environmental Matters..................................... 85
(S) 9.17. Subsidiaries.............................................. 87
(S) 9.18. Excess Balances........................................... 87
(S) 9.19. Net Proceeds from a Takeout Financing, Special
Subordinated Takeout Financing or Initial Equity
Issuance.................................................. 87
(S) 9.20. Interest Rate Protection.................................. 88
(S) 9.21. Financial Covenants....................................... 88
(S) 9.22. Access to Accountants..................................... 91
SECTION 10. NEGATIVE COVENANTS........................................ 91
(S) 10.1. Capital Expenditures...................................... 91
(S) 10.2. Liens..................................................... 92
(S) 10.3. Indebtedness.............................................. 93
(S) 10.4. Loans, Investments and Guarantees......................... 94
(S) 10.5. Merger, Sale of Assets, Dissolution, Etc.................. 95
(S) 10.6. Dividends, Redemptions and Other Payments................. 96
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(S) 10.7. Subsidiaries.............................................. 97
(S) 10.8. Transactions With Affiliates.............................. 98
(S) 10.9. Management Fees and Other Payments........................ 98
(S) 10.10. Compromise of Receivables................................ 98
(S) 10.11. Noncompliance With ERISA................................. 99
(S) 10.12. Amendments and Modifications............................. 99
(S) 10.13. Agreements with Management............................... 100
(S) 10.14. Fiscal Year.............................................. 100
(S) 10.15. Change of Business....................................... 100
(S) 10.16. Negative Pledges......................................... 100
(S) 10.17. Rental Obligations....................................... 101
SECTION 11. DEFAULTS AND REMEDIES...................................... 101
(S) 11.1. Events of Default......................................... 101
(S) 11.2. Suits for Enforcement..................................... 107
(S) 11.3. Rights and Remedies Cumulative............................ 107
(S) 11.4. Rights and Remedies Not Waived............................ 107
(S) 11.5. Application of Proceeds................................... 107
(S) 11.6. FCC Approval.............................................. 108
SECTION 12. REPRESENTATIONS AND WARRANTIES............................. 109
(S) 12.1. Limited Partnership and Corporate Status.................. 109
(S) 12.2. Power and Authority....................................... 110
(S) 12.3. No Violation of Agreements................................ 110
(S) 12.4. No Litigation............................................. 111
(S) 12.5. Good Title to Properties; Condition of Assets............. 111
(S) 12.6. Financial Statements and Condition........................ 112
(S) 12.7. Intellectual Property..................................... 113
(S) 12.8. Tax Liability............................................. 113
(S) 12.9. Governmental Action....................................... 113
(S) 12.10. Disclosure............................................... 113
(S) 12.11. Regulation U............................................. 113
(S) 12.12. Investment Company....................................... 114
(S) 12.13. Employee Benefit Plans................................... 114
(S) 12.14. Comcast Acquisition...................................... 116
(S) 12.15. FCC Compliance........................................... 116
(S) 12.16. Permits, Etc............................................. 117
(S) 12.17. Environmental Status..................................... 118
(S) 12.18. Validity of Receivables.................................. 118
(S) 12.19. Representations and Warranties in Other Documents........ 119
SECTION 13. MISCELLANEOUS.............................................. 119
(S) 13.1. Collection Costs.......................................... 119
(S) 13.2. Amendment, Modification and Waiver........................ 119
(S) 13.3. New York Law.............................................. 121
(S) 13.4. Notices................................................... 121
(S) 13.5. Fees and Expenses......................................... 121
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(S) 13.6. Stamp or Other Tax........................................ 121
(S) 13.7. Waiver of Jury Trial and Setoff........................... 121
(S) 13.8. Termination of Agreement.................................. 122
(S) 13.9. Captions.................................................. 123
(S) 13.10. Lien; Setoff by Lenders.................................. 123
(S) 13.11. Payment Due On Non-Business Day.......................... 123
(S) 13.12. Service of Process....................................... 123
(S) 13.13. Union Bank of Switzerland, New York Branch, as Agent..... 124
(S) 13.14. Sale, Assignment or Transfer to Additional
Lenders.................................................. 128
(S) 13.15. Benefit of Agreement..................................... 129
(S) 13.16. Counterparts; Facsimile Signature........................ 131
(S) 13.17. Letter of Credit Participation and Certain
Payments................................................. 131
(S) 13.18. Invalidity............................................... 132
(S) 13.19. Disclosure of Financial Information...................... 132
(S) 13.20. Maintenance of Confidentiality........................... 132
(S) 13.21. Effect of this Agreement................................. 132
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EXHIBITS AND SCHEDULES
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EXHIBITS
Exhibit 1-a Form of Class C Exchange Notes
Exhibit 1-b Form of Class C Subordination Agreement
Exhibit 1-c Form of Class C-1 Exchange Notes
Exhibit 1-d Form of Class C-1 Subordination Agreement
Exhibit 1-e Form of Earn-Out Notes
Exhibit 1-f Form of Earn-Out Subordination Agreement
Exhibit 1-g Executive Compensation Agreements
Exhibit 1-h Form of FCC Lease Assignments
Exhibit 1-i Form of FCC Leases
Exhibit 1-j Form of FCC License Letter
Exhibit 1-k Forms of Guaranteed Loan Guarantees
Exhibit 1-l Form of Guaranteed Note
Exhibit 1-m Form of Management Notes
Exhibit 1-n Management Option Plan
Exhibit 1-o Form of Option Agreements
Exhibit 1-p Form of Put and Call Agreement
Exhibit 1-q Form of Subordinated Loan Documents
Exhibit 1-r Form of Subordinated Notes
Exhibit 2.3 Form of Revolving Note
Exhibit 2.5 Form of Term Note
Exhibit 2.6 Form of Borrower's Certificate
Exhibit 5.1-1 Form of Security Agreement
Exhibit 5.1-2 Form of Landlord's Certificate
Exhibit 5.2 Form of Security Agreement--Trademarks, Patents and
Copyrights
Exhibit 5.3 Form of Assignment of Life Insurance
Exhibit 5.7 Form of Guaranty
Exhibit 5.8 Form of Pledge Agreement
Exhibit 6.1-1 Form of Opinion of Rosenman & Colin
Exhibit 6.1-2 Form of Opinion of Heller, Ehrman, White & McAuliffe
Exhibit 6.23 Form of Disbursement Authorization Letter
Exhibit 9.1(j) Form of Borrowing Base Certificate
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SCHEDULES
Schedule 1-a Leased Channels
Schedule 1-b FCC Licenses
Schedule 1-c Franchise Contracts
Schedule 1-d Initial Eurodollar Offices
Schedule 1-e Management Notes
Schedule 1-f Muzak Management
Schedule 1-g Rollover Eurodollar Advances and Rollover Letters of
Credit
Schedule 2.2 Revolving Loan, Term Loan and Letter of Credit
Commitments
Schedule 5.4 Real Estate - Mortgages
Schedule 6.12 Eurodollar Loans and Letters of Credit Outstanding
Immediately Prior to the New Closing Date
Schedule 6.26 States of Qualification of Credit Parties and General
Partners
Schedule 9.16 Hazardous Materials
Schedule 10.2 Existing Permitted Liens
Schedule 10.3 Permitted Indebtedness
Schedule 10.4 Permitted Investments
Schedule 10.6(b) Existing Indebtedness for Borrowed Money
Schedule 12.1(a) Principal Places of Business of Subsidiaries
Schedule 12.1(c) Holders of Equity Interests in the Borrower and each
Subsidiary
Schedule 12.1(d) Location, Jurisdiction of Organization and
Capitalization of Credit Parties and their Subsidiaries
Schedule 12.3(a) Defaulted Agreements
Schedule 12.3(b) Violations under Agreements
Schedule 12.4 Litigation
Schedule 12.5(a)-1 Properties and Assets; Defects and Defaults
Schedule 12.5(a)-2 Real Properties; Defects and Defaults
Schedule 12.5(b) Leases; Defects and Defaults
Schedule 12.5(c) Tangible Assets; Defects and Defaults
Schedule 12.6 Financial Condition and Material Adverse Changes
Schedule 12.7 Intellectual Property; Defects and Defaults
Schedule 12.13 Employee Plans
Schedule 12.15 Governmental Permits (FCC); Defects and Defaults
Schedule 12.16 Governmental Permits (Non-FCC); Defects and Defaults
Schedule 12.17 Violations of Environmental Law
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AMENDED AND RESTATED CREDIT AGREEMENT, dated as of September 4, 1992,
as AMENDED AND RESTATED as of January 31, 1994, among MUZAK LIMITED PARTNERSHIP,
a Delaware limited partnership (the "BORROWER"), the lenders and other financial
institutions which are now or may hereafter become parties hereto (such lenders
and other financial institutions and their respective successors and assigns,
individually, a "LENDER" and collectively, the "LENDERS"), and UNION BANK OF
SWITZERLAND, NEW YORK BRANCH, individually ("UBS") and as agent for the Lenders
(in such capacity, the "AGENT").
WHEREAS, the Borrower, the Lenders and the Agent are parties to the
Credit Agreement, dated as of September 4, 1992 (as amended as of October 22,
1992 and as of December 15, 1993, together with the Exhibits and Schedules
thereto, the "ORIGINAL CREDIT AGREEMENT" pursuant to which the Lenders have
advanced Loans to, and the Issuing Lender has issued Letters of Credit (each, as
defined herein) for the benefit of, the Borrower upon the terms and subject to
the conditions set forth in the Original Credit Agreement.
WHEREAS, Comcast Corporation, its wholly-owned subsidiaries, Comcast
Sound Communications, Inc., a Delaware corporation ("CSCI") and Comcast Real
Estate Holdings, Inc., a Delaware corporation, and CSCI's wholly-owned
subsidiaries, Comcast Sound Communications, Inc., a California corporation,
Comcast Sound Communications, Inc., a Colorado corporation, Comcast Sound
Communications, Inc., a Connecticut corporation, Comcast Sound Communications,
Inc., a Florida corporation, Comcast Sound Communications, Inc., a Texas
corporation, Comcast Sound Communications, Inc., a Michigan corporation, Comcast
Sound Communications, Inc., a New York corporation, Comcast Sound
Communications, Inc., a Pennsylvania corporation, Comcast Sound Communications,
Inc., an Illinois corporation, Comcast Sound Communications, Inc. an Indiana
corporation, Comcast Sound Management, Inc., a Pennsylvania corporation and
Comcast Sound Communications, an Indiana partnership (collectively, the
"TRANSFERORS") and the Borrower are parties to an Asset Purchase and
Contribution Agreement, dated as of November 24, 1993 (as such agreement may be
amended, modified or supplemented from time to time in accordance with the terms
thereof and hereof, the "COMCAST PURCHASE AGREEMENT"), pursuant to which the
Borrower shall, on the New Closing Date (as defined herein), purchase certain
non-cash assets and properties of the Transferors (as further described in
Section 1.1 of the Comcast Purchase Agreement, the "COMCAST ASSETS") and assume
certain of the liabilities of the Transferors (the "COMCAST ACQUISITION"), all
as set forth in the Comcast Purchase Agreement;
WHEREAS, in connection with the Comcast Purchase Agreement, the
Borrower desires to borrow on the New Closing Date from the Lenders hereunder
certain sums on a term loan basis, the proceeds of which shall be applied by the
Borrower to finance and increase the Original Term Loan (as defined herein),
towards a portion of the cash purchase price of the Comcast Assets and towards
the payment of certain fees and expenses relating to the Comcast Acquisition,
and to borrow from the Lenders hereunder on the New Closing Date and from time
to time thereafter certain sums on a revolving credit basis, the proceeds of
which shall be applied by the Borrower to finance and increase the Original
Revolving Loan and to working capital needs of the Borrower;
WHEREAS, the Borrower desires to cause (and to continue to cause after
the New Closing Date) each Issuing Lender (as defined herein) to issue from time
to time after the
<PAGE>
Closing Date one or more trade or standby letters of credit (each a "LETTER OF
CREDIT") for the account of the Borrower to secure the performance of certain
obligations which the Borrower may have from time to time to third parties in
the normal conduct of its business, with those Letters of Credit issued and
outstanding immediately prior to the New Closing Date continuing as Letters of
Credit for all purposes of this Agreement; and
WHEREAS, the Lenders are willing, subject to and upon the terms and
conditions herein set forth, to extend and to continue to extend such financial
accommodations to the Borrower.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which hereby are acknowledged, and subject to the fulfillment of the
conditions set forth below, the Original Loan Agreement is hereby AMENDED AND
RESTATED as follows:
"SECTION 1. DEFINITIONS AND ACCOUNTING TERMS
(S) 1.1. Certain Defined Terms. For all purposes of this Agreement,
---------------------
unless the context otherwise requires (the following meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ACQUISITION" shall mean the acquisition by the Borrower on the
Closing Date of substantially all of the assets of the Company and the equity
securities in certain of the Company's subsidiaries, and the assumption by the
Borrower on the Closing Date of certain of the liabilities of the Company, all
as set forth in the Purchase Agreement.
"ADDITIONAL INDEBTEDNESS" shall mean all Lender Debt other than
principal of Advances and interest thereon.
"ADDITIONAL LENDERS" shall have the meaning set forth in Section 13.14
hereof.
"ADJUSTED EURODOLLAR RATE" shall mean, with respect to each Interest
Period for a Eurodollar Advance, the rate obtained by dividing (i) the
Eurodollar Rate for such Interest Period by (ii) a percentage equal to 1 minus
the stated maximum rate (stated as a decimal) of all reserves then required to
be maintained against "Eurocurrency liabilities" as specified in Regulation D
(or against any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Advances is determined or any
category of extensions of credit or other assets which includes loans by a non-
United States office of any Lender to United States residents).
"ADMINISTRATIVE GENERAL PARTNER" shall mean MLP Administration Corp.,
a Delaware corporation, in its capacity as administrative general partner under
the Partnership Agreement.
"ADVANCES" shall mean any borrowing hereunder of the Term Loan or a
Revolving Advance, including each Eurodollar Advance and each Base Rate Advance.
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"AFFILIATE" of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under common control with
such specified Person or which is a director, officer or partner (limited or
general) of such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person, means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. For the purposes of
this definition (and without limiting such definition in any manner), each of
the Partners (other than UBS and its Affiliates, Barclays and its Affiliates,
The Field Corporation and its Affiliates, the Transferors and their respective
Affiliates, and any other Lender and its Affiliates), their respective
Affiliates and the officers and directors of the Borrower shall be deemed to
control the Borrower and its Subsidiaries and shall be an Affiliate of the
Borrower and its Subsidiaries.
"AGENT" shall have the meaning set forth in the preamble to this
Agreement and in Section 13.13(j) hereof.
"AGGREGATE NON-UBS CASH BALANCE" shall have the meaning set forth in
Section 9.18 hereof.
"AGGREGATE REVOLVING COMMITMENTS" shall mean, at any time, the sum of
the Revolving Commitments of the Lenders at such time.
"AGGREGATE TERM LOAN COMMITMENTS" shall mean, at any time, the sum of
the Term Loan Commitments of the Lenders at such time.
"AGREEMENT" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time.
"APPROVED DELEGATE" shall have the meaning set forth in Section
13.13(n) hereof.
"ASSET SALE" shall mean any sale, lease, conveyance, transfer or other
disposition by the Borrower or any Subsidiary (including by way of merger or
consolidation of a Subsidiary or sale-leaseback transaction), in any transaction
or group of transactions that are part of a common plan, of any asset, other
than sales and dispositions of the type described in clauses (a) through (f) in
Section 10.5 hereof.
"ASSETS" shall include all of the Borrower's machinery, data
processing hardware and software, furniture, fixtures, dies, tools, jigs, office
equipment and other tangible personal property of the Borrower, and all
accessions, accretions, and additions to Equipment, and all other component and
auxiliary parts used or to be used in connection with or attached to any of the
same, wherever located, whether now owned or hereafter acquired, including,
without limitation, the Comcast Assets.
"AUTHORIZED REPRESENTATIVE" shall mean each Person designated from
time to time, as appropriate, in a Written Notice by the Borrower to the Agent
for the purposes of giving
3
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notices of borrowing, conversion or renewal of Revolving Advances, which
designation shall continue in force and effect until terminated in a Written
Notice to the Agent.
"BARCLAYS" shall mean Barclays Bank PLC, New York Branch, and its
successors and assigns.
"BASE RATE" shall mean a fluctuating interest rate per annum
(calculated on the basis of actual days elapses over a 365 day year) as shall be
in effect from time to time, which rate per annum shall at all times be equal to
the higher of (a) the rate of interest announced publicly by UBS in New York,
New York from time to time as its base rate for U.S. dollar loans, such rate to
change when and as such announced rate changes, plus (x) at any time prior to
the date of the closing of the Initial Equity Issuance, one and three-quarters
percentage points (1-3/4%), and (y) on and following the date of the closing of
the Initial Equity Issuance, one-quarter percentage point ( 1/4%), and (b) one-
quarter percentage point ( 1/4%) above the Federal Funds Rate.
"BASE RATE ADVANCE" shall mean any portion of an Advance which is not
a Eurodollar Advance.
"BILL OF SALE" shall have the meaning set forth in the Purchase
Agreement.
"BOARD" shall mean the Board of Governors of the Federal Reserve
System or any successor agency or entity performing substantially the same
functions.
"BORROWER" has the meaning set forth in the preamble to this
Agreement.
"BORROWER'S CERTIFICATE" shall have the meaning set forth in Section
2.7 hereof.
"BORROWING BASE" shall mean, as of any time, an amount equal to the
sum of (a) 33% of the aggregate value (determined at the lower of cost (at the
lower of a first-in, first-out basis and a weighted average of cost basis) and
current market value) of Eligible Inventory as indicated on the most recent
Borrowing Base Certificate delivered to the Agent by the Borrower as of such
time, plus (b) 80% of the Net Amount of Eligible Receivables as of such time.
"BORROWING BASE CERTIFICATE" shall have the meaning set forth in
Section 9.1(j) hereof.
"BORROWING LIMIT" shall have the meaning set forth in Section 2.2(a)
hereof.
"BUSINESS DAY" shall mean (a) for those portions of Advances
constituting Base Rate Advances and in any event for the purposes of Section
11.1(b) hereof, any day other than a Saturday, Sunday or other day on which
banks in New York, New York are authorized or required to close; and (b) for
those portion of Advances constituting Eurodollar Advances but in no event for
the purposes of Section 11.1(b) hereof, the days described in the immediately
preceding subclause (a) for the definition of Business Day, but excluding
therefrom any day on
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which commercial banks are not open for dealings in Dollar deposits in the
London (England, U.K.) interbank market.
"CCI" shall mean Centre Capital Investors L.P., a Delaware limited
partnership.
"CAPITAL EXPENDITURES" shall mean, for any fiscal period and as
determined in accordance with GAAP, all expenditures (whether made in the form
of cash or other property, including, without limitation, expenditures made by
exchanging or trading in property) for, or contracts for expenditures with
respect to, any fixed assets or improvements, or for replacements, substitutions
or additions thereto, that have a useful life of more than one year, including,
but not limited to payments on account of (i) the direct or indirect acquisition
of such assets by way of increased product or service charges, offset items or
otherwise, (ii) any Liens permitted pursuant to Section 10.2(d) hereof, and
(iii) Capital Leases; provided, however, that solely for the purpose of
calculating the covenant set forth in Section 10.1 hereof, Capital Expenditures
shall exclude capitalized labor expenditures.
"CAPITAL LEASE" of any Person shall mean any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is, or is required to be, accounted for as a capital lease on the
balance sheet of such Person.
"CAPITALIZED LEASE OBLIGATIONS" of any Person shall mean, at any time,
all obligations under Capital Leases of such Person in each case taken at the
amount thereof accounted for as liabilities at such time in accordance with
GAAP.
"CASH INTEREST EXPENSE" of the Borrower and its Subsidiaries for each
of the most recent four consecutive fiscal quarter periods, shall mean the
aggregate amount of cash required to be applied to Interest Expense by the
Borrower and its Subsidiaries during such period.
"CENTRE PARTNERS" shall mean Centre Partners L.P., a Delaware limited
partnership.
"CENTRE PARTNERS ENTITIES" shall mean Centre Partners and other
entities under the exclusive management control of Centre Partners and of which
Centre Partners maintains sole controlling interest and owns at least a 50%
equity interest.
"CERTIFICATE" shall have the meaning set forth in Section 3.4(b)
hereof.
"CERTIFICATES OF EXEMPTION" shall have the meaning set forth in
Section 3.4(b) hereof.
"CHANGE OF CONTROL" shall mean (i) a "Transfer Event", as such term is
defined in the Partnership Agreement in effect on the New Closing Date, (ii) a
"Transfer Event", as such term is defined in the Subordinated Loan Documents in
effect on the Closing Date, (iii) any other event the result of which is that
Centre Partners Entities shall cease to hold a majority equity interest and sole
controlling interest in the Managing General Partner, (iv) any other event the
result of which is that Managing General Partner or another Centre Partners
Entity is no longer the sole managing general partner of the Borrower, or (v)
any other event the result of
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which is that Centre Partners Entities shall cease to own a majority of the
common partnership interests and a majority of the voting equity interests in
the Borrower.
"CHANGE OF LAW" shall mean any law, treaty, order, directive or
regulation or in the interpretation thereof or any ruling, decree, judgment or
recommendation, or any request, guideline or directive (whether or not given the
force of law) in any case adopted, issued or newly effective after the Closing
Date, or any change, adopted, newly effective or issued after the Closing Date
of any of the foregoing (and including in any event all risk based capital
guidelines heretofore adopted by the Comptroller of the Currency, the Board or
any other banking regulatory agency, domestic or foreign, to the extent that any
provision contained therein does not have to be complied with as of the date
hereof), by any regulatory body, court or any administrative or Governmental
Body charged or claiming to be charged with the administration thereof.
"CHANNEL CAPACITY" shall mean any capacity for transmission of
programming material, data or other intelligence.
"CHANNEL CAPACITY PROVIDERS" shall mean those parties which provide,
and those parties which may in the future provide, any Channel Capacity to the
Borrower or to any of its FCC Affiliates, whether by lease, joint venture, cost-
sharing arrangement, or any other agreement or arrangement; the term "Channel
Capacity Providers" shall include, without limitation, the respective FCC
licensees of those FM broadcast and/or other stations from which the Borrower
leases a sub-carrier channel or other Channel Capacity from time to time,
including, without limitation, those channels of communication leased on the
Closing Date pursuant to leases listed on Schedule 1-a attached hereto.
"CLAIMS" shall have the meaning set forth in Section 2.15(c) hereof.
"CLASS A-1 PARTNERSHIP INTERESTS" shall mean the class A-1 limited
partnership interests of the Borrower issued pursuant to the Partnership
Agreement and held on the Closing Date by Centre Partners Entities.
"CLASS A-2 PARTNERSHIP INTERESTS" shall mean the class A-2 limited
partnership interests of the Borrower issued pursuant to the Partnership
Agreement and held on the New Closing Date by UBS (or an Affiliate),
Internationale Nederlanden (U.S.) Finance Corporation (or an Affiliate), and Mr.
John A. Hawkins.
"CLASS B PARTNERSHIP INTERESTS" shall mean the class B limited
partnership interests of the Borrower issued pursuant to the Partnership
Agreement and held on the Closing Date by certain members of Muzak Management.
"CLASS C EXCHANGE NOTES" shall mean those certain subordinated
promissory notes of the Borrower in substantially the form attached hereto as
Exhibit 1-a, that may be issued by the Borrower in exchange for the Class C
Partnership Interests pursuant to the terms of Section 2.1 of the Purchase
Agreement and Section 16.02 of the Partnership Agreement, as they may be
amended, modified or supplemented from time to time in accordance with the terms
hereof and
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thereof, which promissory notes shall in all events be subject to the terms of
the applicable Subordination Agreement.
"CLASS C PARTNERSHIP INTERESTS" shall mean the class C limited
partnership interests of the Borrower issued pursuant to the Partnership
Agreement and held on the New Closing Date by the Company.
"CLASS C SUBORDINATION AGREEMENT" shall mean that certain Exchange
Note Subordination Agreement, dated the Closing Date, by and among the Borrower,
the Company, Barclays and the Agent, in substantially the form attached hereto
as Exhibit 1-b.
"CLASS C-1 EXCHANGE NOTES" shall mean those certain subordinated
promissory notes of the Borrower in substantially the form attached hereto as
Exhibit 1-c, that may be issued by the Borrower in exchange of the Class C-1
Partnership Interests pursuant to the terms of Section 2.1 of the Comcast
Purchase Agreement and Section 17.02 of the Partnership Agreement as they may be
amended, modified or supplemented from time to time in accordance with the terms
hereof and thereof, which promissory notes shall in all events be subject to the
terms of the applicable Subordination Agreement.
"C-1 HOLDERS" shall mean, at any time, the holders of the Class C-1
Partnership Interests at such time, and on the New Closing Date shall mean
Comcast Sound Communications, Inc., an Illinois corporation, and Comcast Sound
Communications, Inc., a Colorado corporation.
"CLASS C-1 PARTNERSHIP INTERESTS" shall mean the class C-1 limited
partnership interests of the Borrower issued pursuant to the Partnership
Agreement and held on the New Closing Date by the C-1 Holders.
"CLASS C-1 SUBORDINATION AGREEMENT" shall mean that certain
Subordination Agreement, dated the New Closing Date, by and among the Borrower,
CSCI, Barclays and the Agent, in substantially the form attached hereto as
Exhibit 1-d, as it may be amended, modified or supplemented from time to time in
accordance with the terms hereof and thereof.
"CLOSING DATE" shall mean September 4, 1992.
"CODE" shall mean, at any date, the Internal Revenue Code of 1986, as
the same shall be in effect at such date, and the regulations thereunder.
"COLLATERAL" shall mean all property and interests therein (real and
personal, tangible and intangible) in which a Lien is now or hereafter granted
to the Agent, the Lenders or any Issuing Lender by any Credit Party or any
Subsidiary thereof as security for the Lender Debt or any guarantee thereof,
including, without limitation, the Letter of Credit Cash Collateral and the
collateral security referred to in Section 3.4(f) hereof.
"COMCAST ACQUISITION" shall have the meaning set forth in the preamble
to this Agreement.
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"COMCAST ASSETS" shall have the meaning set forth in the preamble to
this Agreement.
"COMCAST PURCHASE AGREEMENT" shall have the meaning set forth in the
preamble to this Agreement.
"COMCAST PURCHASE DOCUMENTS" shall mean the Comcast Purchase
Agreement, together with the schedules attached thereto, the bill of sale, the
non-competition agreement and each other document, instrument or agreement
(other than the Partnership Agreement, the Class C-1 Exchange Notes and the
Class C-1 Exchange Note Subordination Agreement) executed in connection with the
Comcast Acquisition.
"COMMITMENT" shall mean, with respect to each Lender, such Lender's
Revolving Commitment and Term Loan Commitment.
"COMMITMENT LETTER" shall mean the letter agreement, dated November
24, 1993, and accepted and agreed by the Borrower (and, as to their respective
obligations under the Guaranteed Loan Guarantees and the Put and Call, MLP and
CCI), as supplemented by the Fee Letter, as such letter agreement may be amended
from time to time in accordance with its terms, and the term sheet attached
thereto.
"COMMUNICATIONS ACT" shall mean the Communications Act of 1934, as
amended.
"COMPANY" shall mean, MLP Sales Limited Partnership, a Delaware
limited partnership, and known prior to the Closing Date as Muzak Limited
Partnership.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section
13.20 of this Agreement.
"CONTINGENT OBLIGATIONS" of any Person shall mean any direct or
indirect liability of such Person (i) with respect to any indebtedness, lease,
dividend, letter of credit or other obligation of another if the primary purpose
or intent by the Person incurring such liability is to provide assurance to the
obligee of such obligation of another that such obligation of another will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof; (ii) under any letter of credit issued
for the account of such Person or for which such Person is otherwise liable for
reimbursement thereof; (iii) net obligations under any Hedge Agreement; or (iv)
to advance or supply funds or otherwise to assure or hold harmless the owner of
a primary obligation against loss in respect thereof. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guarantee,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, and (b) any liability of such Person for
the obligations of another through any agreement (contingent or otherwise) (i)
to purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise); (ii) to maintain the Solvency or any balance sheet item, level of
income or financial condition of another; or (iii) to make take-or-pay or
similar
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payments if required regardless of non-performance by any other party or parties
to an agreement, if in the case of any agreement described under subclauses (i)
or (ii) of this sentence the primary purpose or intent thereof is as described
in the immediately preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported.
"CONVERTED LOAN" shall mean a subordinated loan of up to $5,000,000
principal amount (and the related subordinated loan documents), that may be
issued by the Borrower (i) to UBS in partial satisfaction of the Guaranteed
Loan, or (ii) to MLP in connection with the fulfillment by either guarantor
under the Guaranteed Loan Guarantees of their obligations thereunder, in each
case, subject to the specified circumstances and pursuant to the terms and
conditions set forth in the Guaranteed Note and the Put and Call, which
Converted Loan shall be on terms substantially identical (including concurrent
payment dates for principal and interest thereunder) to the Subordinated Loan
Agreement.
"CONVERTED EQUITY" shall mean up to 5,000,000 units of Class A-2
Partnership Interests that may be issued by the Borrower, either (i) to UBS in
partial satisfaction of the Guaranteed Loan, or (ii) to MLP in connection with
the fulfillment by either guarantor under the Guaranteed Loan Guarantees of
their obligations thereunder, in each case, subject to specified circumstances
and pursuant to the terms and conditions set forth in the Guaranteed Note and
the Put and Call.
"CREDIT PARTIES" shall mean and include the Borrower, its
Subsidiaries, if any, and MLP Communications Company.
"CSCI" shall have the meaning set forth in the preamble to this
Agreement.
"CURRENT ASSETS" shall mean all assets of the Borrower and its
Subsidiaries, determined on a combined basis, that would, in accordance with
GAAP, be classified as current assets, after deducting adequate reserves in each
case in which a reserve is proper in accordance with GAAP.
"CURRENT LIABILITIES" shall mean all liabilities of the Borrower and
its Subsidiaries, determined on a combined basis (excluding current maturities
(that is, those that will become due within 12 months following the date of
determination) for Indebtedness for Borrowed Money), that would, in accordance
with GAAP, be classified as current liabilities.
"DEFAULT" shall mean an event, act or condition which with the giving
of notice or the lapse of time, or both, would constitute an Event of Default,
provided, however, that a default in payment by any Credit Party of any
Additional Indebtedness shall not be deemed a Default hereunder until the tenth
Business Day following (i) the date of demand therefor, if such Additional
Indebtedness became due upon demand, or (ii) the date such payment became due,
if such Additional Indebtedness became due without demand.
"DISCLOSURE SCHEDULES" shall mean all schedules delivered by the
Company pursuant to the Purchase Agreement.
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"DISTRIBUTABLE INCOME TAXES" shall mean, for any tax period (including
any quarterly estimated tax period) (but only for such periods as the Borrower
is treated as a partnership under the Code), distributions by the Borrower to
any Person who is treated as a taxpayer with respect to the Partnership
Interests to enable such Person to discharge any cash tax liabilities incurred
by such Person solely as a result of such Person's Partnership Interest in the
Borrower, provided, however, the amount distributed to all Persons shall not
exceed in the aggregate the lesser of (x) the product of (i) the taxable income
of the Borrower that the Borrower reports (or would report for such tax period
if a return were due) for Federal income tax purposes determined as if the
Borrower were a separately taxable entity and (ii) a percentage equal to the
lesser of (a) 50%, or (b) the sum of (1) the highest marginal Federal income tax
rate applicable to individuals or, if higher, the highest marginal Federal
income tax rate applicable to corporations, in effect for such tax period and
(2) the product of (r) the highest marginal combined New York State and New York
City income tax rate applicable to individuals or, if the corporate rate is
determined to be the applicable rate in clause (x)(ii)(b)(1) hereof, the highest
marginal combined New York State and New York City income tax rate applicable to
corporations, in effect for such tax period, and (s) 1 minus the marginal
Federal income tax rate determined for such tax period pursuant to clause
(x)(ii)(b)(1) hereof, and (y) the product of (i) the sum of the taxable income
and taxable loss of the Borrower that the Borrower reports (or would report for
all such tax periods if returns were due) for Federal income tax purposes for
all tax periods that the Borrower has been in existence determined as if the
Borrower were a separate taxable entity and (ii) a percentage equal to the
lesser of (a) 50%, or (b) the sum of (1) the highest marginal Federal income tax
rate applicable to individuals or, if higher, the highest marginal Federal
income tax rate applicable to corporations in effect for such tax period and (2)
the product of (r) the highest marginal combined New York State and New York
City income tax rate applicable to individuals or, if the corporate rate is
determined to be the applicable rate in clause (y)(ii)(b)(1) hereof, the highest
marginal combined New York State and New York City income tax rate applicable to
corporations, in effect for such tax period, and (s) 1 minus the marginal
Federal income tax rate determined for such tax period pursuant to clause
(y)(ii)(b)(1) hereof.
"EARN-OUT NOTES" shall mean those certain subordinated earn-out
promissory notes of the Borrower in substantially the form attached hereto as
Exhibit 1-e, that may be issued by the Borrower pursuant to the terms of Section
2.5(b) of the Purchase Agreement, which promissory notes shall be subject to the
terms of the applicable Subordination Agreement.
"EARN-OUT PAYMENT" shall mean that certain earn-out payment to the
extent payable by the Borrower pursuant to the terms of Section 2.5 of the
Purchase Agreement (as in effect on the Closing Date or otherwise amended with
the written consent of the Majority Lenders) and to the extent not prohibited by
Section 10.6(c) hereof.
"EARN-OUT SUBORDINATION AGREEMENT" shall mean that certain Earn-Out
Subordination Agreement, dated the Closing Date, by and among the Borrower, the
Company, Barclays and the Agent, in substantially the form attached hereto as
Exhibit 1-f, as it may be amended, modified or supplemented from time to time in
accordance with the terms hereof and thereof.
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"EBITDA" of the Borrower and its Subsidiaries for any period shall
mean, determined on a combined basis in accordance with GAAP, the sum of (i) the
Net Income from operations of the Borrower and its Subsidiaries for such period,
without giving effect to (x) any extraordinary or non-recurring gains (losses)
(not in the ordinary course of business) or (y) other gains (losses) from the
sale of assets (other than the sale of Inventory in the ordinary course of
business); plus (ii) to the extent that any of the items referred to in any of
clauses (A) through (C) below were deducted in calculating such Net Income: (A)
Interest Expense of the Borrower and its Subsidiaries for such period; (B)
management related expenses of the Borrower, its Subsidiaries and the Managing
General Partner with respect to their operations for such period (such as, by
way of example, tax, legal and audit expenses and directors' fees of the
corporation which is the managing general partner of the Managing General
Partner, which directors' fees shall not to exceed $100,000 (plus cost of living
increases not to exceed 5% per annum) in the aggregate for any one calendar
year); and (C) the amount of all non-cash charges (including, without
limitation, depreciation and amortization and non-cash charges relating to the
Management Option Plan) of the Borrower and its Subsidiaries for such period;
minus (plus) (iii) the amount of all non-cash gains (losses) included in
determining such Net Income for such period.
"ELIGIBLE INVENTORY" shall mean only such Inventory of the Borrower
and its Subsidiaries as the Agent, in its reasonable discretion, shall from time
to time elect to consider Eligible Inventory for purposes of this Agreement.
The value of such Inventory shall be determined by the Agent, in its reasonable
discretion, taking into consideration the lowest of its cost (at the lower of a
first-in, first-out basis and a weighted average of cost basis), its book value
determined in accordance with GAAP and its current market value. Criteria for
eligibility may be fixed and revised from time to time by the Agent in its
reasonable discretion. By way of example only, and without limiting the
discretion of the Agent to consider any Inventory not to be Eligible Inventory,
the Agent may consider any of the following classes of Inventory not to be
Eligible Inventory: (a) Inventory subject to any Lien, other than those granted
in favor of the Agent; (b) Inventory financed by bankers' acceptances, but only
until the payment in full of the related bankers' acceptances by the Borrower;
(c) Inventory which is obsolete, damaged, unsalable or otherwise unfit for use;
provided, that salvage inventory shall not be so excluded to the extent it may
be returned to the vendor or manufacturer thereof for a full refund; (d)
Inventory located on any premises under a lease as to which no Landlord's
Certificate has been delivered to the Agent; and (e) Inventory in respect of
which the relevant Security Agreement, after giving effect to the related
filings of financing statements that have then been made, if any, does not or
has ceased to create a valid and perfected first priority Lien in favor of the
Lenders securing the Lender Debt.
"ELIGIBLE RECEIVABLES" shall mean at the time of calculation bona fide
outstanding Receivables of the Borrower and its Subsidiaries (i) in which the
Agent has a first priority perfected security interest; (ii) which arose in the
ordinary course of the Borrower's or any of its Subsidiary's businesses; (iii)
as to which all applicable services have been duly performed or as to which all
goods have been delivered to the account debtor or which are otherwise due in
accordance with their terms; and (iv) which do not relate to goods or services
to be delivered or performed more than 30 days following the time of
calculation, provided, however, that this clause (iv) shall not apply to up to
$225,000 of Receivables (that but for this clause (iv) qualify as Eligible
Receivables) to the extent that the billing and payment schedules with respect
to such
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Receivables are in the ordinary course of the Borrower's business. The term
"Eligible Receivables" shall not include any Receivable (a) not included in
"Owned Affiliate Division Receivables" on the Borrower's books and records
(which "Owned Affiliate Division Receivables" shall continue to include after
the New Closing Date all Receivables created with respect to the Comcast Assets)
with respect to which more than 60 days have elapsed since the due date thereof
(without giving effect to any extensions of the due date); (b) included in
"Owned Affiliate Division Receivables" on the Borrower's books and records with
respect to which more than 90 days have elapsed since the invoice date thereof;
(c) with respect to which any of the representations and warranties contained in
Section 12.18 hereof are not or have ceased to be true, complete and correct;
(d) with respect to which, in whole or in part, a check, promissory note, draft,
trade acceptance or other instrument for the payment of money has been received,
presented for payment and returned uncollected for any reason; (e) owed by an
account debtor which: (1) does not maintain its chief executive office in the
United States; or (2) is not organized under the laws of the United States or
any State thereof, except to the extent, in the case of either (1) or (2), such
account debtor has provided to the Borrower or the applicable Subsidiary a
letter of credit (issued by a bank, and in form, acceptable to the Agent)
supporting the payment of such Receivables; (f) owed by an account debtor which
has taken any action, or suffered any event to occur, of the type described in
paragraph (h) or (i) of Section 11.1 hereof; (g) as to which either the
perfection, enforceability, or validity of the security interest in such
Receivable, or the Agent's right or ability to obtain direct payment to the
Agent of the proceeds of such Receivable, is governed by any federal, state, or
local statutory requirements other than those of the UCC; (h) owed by an account
debtor to which the Borrower or any of its Subsidiaries owes any Indebtedness
(other than arising under or in connection with the agreement which gave rise to
such Receivable) and which account debtor has asserted a right of set-off, or
any other account debtor who has asserted a right of set-off and, in each case,
has a basis to assert a right of set-off, or who has disputed and has a basis to
dispute any liability or who has acknowledged its inability to pay or made any
claim with respect to any other Receivable due from such account debtor; but in
each such case only to the extent of such Indebtedness, set-off, dispute, or
claim; (i) if such Receivable or the sale or provision of goods or services
giving rise thereto contravenes any applicable law, rule or regulation,
including any law, rule or regulation relating to truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt collection
practices or privacy; (j) if 50% or more of the aggregate outstanding balance of
all Receivables of such account debtor have not been paid as of the applicable
date set forth in clause (a) or clause (b) above; (k) to the extent existing
from franchise payments that are required to be, or otherwise are forwarded, to
Franchisees and licensees, or (l) if the Agent (1) believes in its good faith
discretion that the prospect of collection of such Receivable is impaired for
any reason or that the Receivable may not be paid by reason of the account
debtor's financial inability to pay, or (2) is not satisfied with the credit
standing of the account debtor with respect to the amount of Receivables payable
to the Borrower or the applicable Subsidiary by such account debtor.
"EMPLOYEE PLAN" shall mean an "employee benefit plan" as defined in
Section 3(3) of ERISA, other than a Multiemployer Plan, which is maintained for,
or contributions are made on behalf of, employees of (i) any Credit Party, or
(ii) any ERISA Affiliate.
"ENVIRONMENTAL LAW" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery
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Act of 1976, as amended, any "Superfund" or "Superlien" law, the Hazardous
Materials Transportation Act, as amended, the Federal Water Pollution Control
Act, as amended, the Clean Air Act, as amended, the Toxic Substances Control
Act, as amended, and any other Federal, state, or local statute, rule,
regulation, ordinance, interpretation, order, judgment, or decree, as now or at
any time hereafter amended or in effect and applicable to the Borrower and its
Subsidiaries, regulating, relating to or imposing liability or standards of
conduct concerning the manufacture, processing, distribution, use, treatment,
handling, storage, disposal, or transportation of Hazardous Materials, or air
emissions, water discharges, noise emissions, or otherwise concerning the
protection of the outdoor or indoor environment.
"ERISA" shall mean, at any date, the Employee Retirement Income
Security Act of 1974 and the regulations promulgated and rulings issued
thereunder, all as the same shall be in effect at such date.
"ERISA AFFILIATE" shall mean any Person that for purposes of Title I
and Title IV of ERISA and Section 412 of the Code is (i) a member of the
controlled group of, or under common control with (within the meaning of Section
414 of the Code and the regulations promulgated and the rulings issued
thereunder) any Credit Party (or, to the extent that the Agent or any Lender has
recourse to it under a Guaranty, any Guarantor), or (ii) solely for purposes of
Sections 9.13, 10.11, 11.1(k) and 12.13 hereof (except as otherwise specified in
such Sections), a member of the controlled group of, or under common control
with (within the meaning of Section 414 of the Code and the regulations
promulgated and the rulings issued thereunder) MLP or any Credit Party (or, to
the extent that the Agent or any Lender has recourse to it under a Guaranty, any
Guarantor); provided, that delivery by the Borrower of any (x) notice pursuant
to Section 9.13, or (y) representation or schedule pursuant to Section 12.13
shall not, in and of itself, be construed as an admission that MLP is in a
controlled group or under common control with any Credit Party (or such
Guarantor) within the meaning of Section 414 of the Code and the regulations
promulgated and the rulings issued thereunder.
"ERISA EVENT" shall mean, with respect to any Credit Party or any
ERISA Affiliate and with respect to any Pension Benefit Plan subject to Title IV
of ERISA or Section 412 of the Code, (a) a Reportable Event, (b) the withdrawal
of any Credit Party or any ERISA Affiliate from a Pension Benefit Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, but only to the extent that such withdrawal results in the
assessment of a material withdrawal liability with respect to any Credit Party
or any ERISA Affiliate, (c) the failure to make required contributions which
would result in the imposition of a Lien under Section 412 of the Code or
Section 302 of ERISA, or (d) any other event or condition which might reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension
Benefit Plan or to cause the imposition of any material liability on any Credit
Party or any ERISA Affiliate under Title IV of ERISA.
"EURODOLLAR ADVANCE" shall mean that portion of the Term Loan or of
any Revolving Advance designated to bear interest based upon the Adjusted
Eurodollar Rate as provided in Section 2 hereof.
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"EURODOLLAR RATE" shall mean, for any Interest Period for any
Eurodollar Advance, an interest rate per annum (calculated on the basis of
actual days elapsed over a 360-day year) equal to the offered quotation, if any,
to first-class banks in the London (England, U.K.) interbank market by the Agent
for U.S. dollar deposits of amounts and in funds comparable to the principal
amount of such Eurodollar Advance requested by the Borrower for which the
Eurodollar Rate is being determined with maturities comparable to the Interest
Period for which such Eurodollar Rate will apply as of approximately 10:00 A.M.
(New York time) two Business Days prior to the commencement of such Interest
Period, subject, however, to the provisions of Section 2.14 hereof.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 11.1
hereof.
"EXCESS CASH FLOW" shall mean for any Fiscal Year of the Borrower (A)
Net Income of the Borrower and its Subsidiaries for such Fiscal Year, minus (B)
Distributable Income Taxes for such Fiscal Year, plus (C) the amount of
depreciation, depletion and amortization expense of the Borrower and its
Subsidiaries for such Fiscal Year to the extent subtracted in determining Net
Income in item (A) above, minus (D) the amount of all payments of principal
actually made by the Borrower and its Subsidiaries during such Fiscal Year on
Indebtedness for Borrowed Money of the Borrower and its Subsidiaries (including
the Earn-Out Payment, but other than on the Revolving Loan, except to the extent
that any such principal is paid pursuant to Section 2.8, Section 3.1(b), (c) and
(d), and Section 3.2(a) and (d) hereof, in any case to permanently reduce the
Revolving Credit Facility Commitment), minus (E) the amount of Capital
Expenditures made in cash by the Borrower and its Subsidiaries in accordance
with Section 10.1 hereof for such Fiscal Year, minus (F) any increase in Working
Capital of the Borrower and its Subsidiaries for such Fiscal Year over that of
the immediately preceding Fiscal Year of the Borrower, plus (G) any decrease in
Working Capital of the Borrower and its Subsidiaries for such Fiscal Year from
that of the immediately preceding Fiscal Year of the Borrower, minus (H) any
reduction in long-term cash liabilities (other than Indebtedness for Borrowed
Money of the Borrower and its Subsidiaries during such Fiscal Year), plus (I)
Interest Expense of the Borrower and its Subsidiaries which was taken into
account in determining Net Income for such Fiscal Year, to the extent such
Interest Expense is not Cash Interest Expense, minus (J) Cash Interest Expense
of the Borrower and its Subsidiaries which not was taken into account in
determining Net Income for such Fiscal Year. For the purposes of this
definition, the fiscal period of the Borrower ending on December 31, 1992 shall
be deemed to be a Fiscal Year.
"EXCLUDED CLAIMS" shall have the meaning set forth in Section 2.15(c)
hereof.
"EXCLUDED TAXES" shall mean franchise taxes and taxes upon or
determined by reference to any Lender's net income, in each case, imposed by the
United States of America or any political subdivision or taxing authority
thereof or therein or by any jurisdiction in which the Initial Eurodollar Office
or other branch of any Lender is located or in which any Lender is organized or
has its principal or registered office (including, without limitation, branch
taxes imposed by the United States or similar taxes imposed by any subdivision
thereof).
"EXECUTIVE AGREEMENTS" shall mean the executive compensation
agreements between the Borrower and Muzak Management from time to time, and on
the Closing Date shall mean the executive compensation agreements contained in
Exhibit 1-g attached hereto.
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"EXTRAORDINARY RECEIPT" shall mean the receipt by the Borrower of cash
receipts not in the ordinary course of business or otherwise not taking into
account in calculating EBITDA, provided, however, that an Extraordinary Receipt
shall not include cash receipts received from: (i) an Asset Sale; (ii) an
Issuance; (iii) proceeds of insurance required to be maintained under Section
9.3 hereof; (iv) adjustments to the purchase price paid to the Borrower under
the Purchase Agreement, or (v) adjustments to the purchase price paid to the
Borrower under the Comcast Purchase Agreement.
"FCC" shall mean the Federal Communications Commission.
"FCC AFFILIATES" shall mean at any time each General Partner,
Subsidiary, Guarantor, Music Holdings Corp., MLP Communications Company and each
General Partner of MLP Communications Company.
"FCC LEASE ASSIGNMENTS" shall mean those certain collateral
assignments from the Borrower to the Agent on behalf of the Lenders of the FCC
Leases, dated the Closing Date (together with similar assignments for FCC Leases
entered into by the Borrower after the Closing Date) in substantially the form
attached hereto as Exhibit 1-h.
"FCC LEASES" shall mean those certain lease agreements between the
Borrower and MLP Communications Company for the leasing by the Borrower of
channel capacity under the FCC Licenses in substantially the respective forms
attached hereto as Exhibit 1-i.
"FCC LICENSE LETTER" shall mean that certain letter agreement among
the Borrower, MLP Communications Company and the Agent, pursuant to which, so
long as any Lender Debt is outstanding, (i) the Borrower will agree to transfer
and assign to MLP Communications Company any FCC License acquired by the
Borrower or any of its Affiliates after the Closing Date; (ii) MLP
Communications Company will agree to promptly enter into a FCC Lease with the
Borrower relating to each FCC License acquired by or transferred or assigned to
it after the Closing Date; and (iii) MLP Communications Company will agree not
to transact any other business, incur any liability or own any other asset other
than owning the FCC Licenses and entering into and performing its obligations
under the FCC Leases, which letter agreement shall be substantially in the form
attached hereto as Exhibit 1-j.
"FCC LICENSES" shall mean the FCC licenses listed on Schedule 1-b
attached hereto, and any and all other licenses, permits and authorizations
which may hereafter be issued by the FCC to MLP Communications Company (or, if
issued to the Borrower or any other FCC Affiliate, transferred (or required to
be transferred) to MLP Communications Company pursuant to the terms of Section
9.7(d) hereof).
"FCC RULES" shall mean the FCC rules and regulations as set forth in
Title 47 of the Code of Federal Regulations, and the FCC's policies thereunder
and under the Communications Act as in effect from time to time.
"FEDERAL BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto.
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"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided, that (i) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (ii) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate quoted to the
Agent on such day on such transactions as determined by the Agent.
"FEE LETTER" shall mean that certain fee letter, dated November 24,
1993, from UBS and accepted and agreed by the Borrower, as such letter may be
amended from time to time in accordance with its terms.
"FISCAL YEAR" shall mean, with respect to the Borrower and its
Subsidiaries, a period beginning on the first day after the last day of the
preceding "Fiscal Year" of such Person and ending on the next following December
31st, except, that, the Fiscal Year for 1992 of the Borrower and its
Subsidiaries shall commence on September 1, 1992 and end on December 31, 1992.
"FIXED CHARGE COVERAGE RATIO" shall mean, for any Fiscal Year of the
Borrower and its Subsidiaries on a combined basis, the ratio obtained by
dividing (a) the difference of (i) EBITDA for such Fiscal Year, minus (ii) the
sum of (x) Capital Expenditures, plus (y) Distributable Income Taxes, in each
case for such Fiscal Year, by (b) the sum of (i) scheduled mandatory principal
payments on Indebtedness for Borrowed Money deducted under clause (D) of the
definition of Excess Cash Flow for such Fiscal Year, plus (ii) Cash Interest
Expense for such Fiscal Year.
"FOREIGN LENDER" shall have the meaning set forth in Section 3.4(b)
hereof.
"FRANCHISE CONTRACTS" shall mean the franchise contracts of the
Borrower from time to time, and on the Closing Date shall mean the franchise
contracts listed on Schedule 1-c hereto.
"FRANCHISEES" shall mean the franchisees subject to the Franchise
Contracts.
"GAAP" shall have the meaning set forth in Section 1.4 hereof.
"GENERAL PARTNERS" shall mean the Managing General Partner and the
Administrative General Partner.
"GENERAL PARTNERSHIP INTERESTS" shall mean the general partnership
interests of the Borrower issued pursuant to the Partnership Agreement and held
on the Closing Date by the General Partners.
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"GERMAN LICENSEE SHARES" shall have the meaning set forth for such
term in the Purchase Agreement.
"GOVERNMENTAL BODY" shall mean any federal, state, local or foreign
governmental authority or regulatory body, any subdivision, agency, commission
or authority thereof or any quasi-governmental or private body exercising any
governmental regulatory authority thereunder and any Person directly or
indirectly owned by and subject to the control of any of the foregoing, or any
court, arbitrator or other judicial or quasi-judicial tribunal.
"GOVERNMENTAL PERMITS" shall all licenses, franchises, permits,
privileges, immunities, approvals, and other authorizations from a Governmental
Body.
"GOVERNMENTAL RULE" shall mean any statute, law, treaty, rule, code,
ordinance, regulation, permit, certificate or order of any Governmental Body or
any judgment, decree, injunction, writ, order or like action of any Governmental
Body.
"GUARANTEED LOAN" shall mean that certain loan made by UBS to the
Borrower on the New Closing Date in the principal amount of $10,000,000 pursuant
to the Guaranteed Note.
"GUARANTEED LOAN DOCUMENTS" shall mean the Guaranteed Note, the Put
and Call, the Guaranteed Loan Guarantees, the documents with respect to the
Converted Loan and each other document or instrument now or hereafter delivered
to UBS in direct connection herewith or therewith, provided, however, that the
Loan Documents shall not constitute Guaranteed Loan Documents.
"GUARANTEED LOAN GUARANTEES" shall mean those two certain
unconditional guarantees of the obligations under the Guaranteed Note or the Put
and Call, as the case may be, in substantially the forms attached hereto as
Exhibit 1-k, as each of such guarantees may be amended, modified or supplemented
from time to time in accordance with the terms hereof and the Guaranteed Note.
"GUARANTEED LOAN MATURITY DATE" shall mean October 31, 1994.
"GUARANTEED NOTE" shall mean that certain senior guaranteed note in
the principal amount of $10,000,000 issued by the Borrower and payable to the
order of UBS, dated the New Closing Date, in substantially the form attached
hereto as Exhibit 1-l, as such document may be amended, modified or supplemented
from time to time in accordance with the terms hereof and thereof.
"GUARANTORS" shall mean, at any time, MLP Communications Company; and
(ii) each of the Borrower's other present or future Subsidiaries.
"GUARANTY" shall have the meaning set forth in Section 5.7 hereof.
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"GUARANTY ACCRUED OBLIGATIONS" shall mean the amounts in cash, if any,
actually paid to UBS by MLP under the Put and Call in excess of the aggregate
principal amount of the Converted Loan and the aggregate face amount of the
Converted Equity.
"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant, chemical,
or industrial or hazardous, toxic or dangerous waste, substance or material,
defined or regulated as such in (or for purposes of) any Environmental Law and
any other toxic, reactive, or flammable chemicals, including (without
limitation) any asbestos, any petroleum (including crude oil or any fraction),
any radioactive substance and any polychlorinated biphenyls; provided, in the
event that any Environmental Law is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment; and provided, further, to the extent that the
applicable laws of any state establish a meaning for "hazardous material,"
"hazardous substance," "hazardous waste," "solid waste" or "toxic substance"
which is broader than that specified in any Environmental Law, such broader
meaning shall apply.
"HEDGE AGREEMENT" shall have the meaning set forth in clause (v) of
the definition of Indebtedness.
"INDEBTEDNESS" of any Person shall mean all items which, in accordance
with GAAP, would be included in determining total liabilities of such Person as
shown on the liability side of a balance sheet as at the date Indebtedness of
such Person is to be determined and, in any event, shall include (without
limitation and without duplication) (i) all Indebtedness for Borrowed Money of
such Person; (ii) any liability of such Person secured by any Lien on property
owned or acquired by such Person, whether or not such liability shall have been
assumed; (iii) all Contingent Obligations of such Person; (iv) the Earn-Out
Payment; and (v) all obligations (other than obligations to pay fees in
connection therewith) of such Person in respect of interest rate swap
agreements, currency swap agreements and other similar agreements designed to
hedge against fluctuations in interest rates or foreign exchange rates with any
Lender or Affiliate of any Lender (each, a "HEDGE AGREEMENT").
"INDEBTEDNESS FOR BORROWED MONEY" of any Person shall mean, without
duplication, all Indebtedness for borrowed money or evidenced by notes, bonds,
debentures or similar evidences of Indebtedness of such Person, all obligations
of such Person for the deferred and unpaid purchase price of any property,
service or business (other than trade and other accounts payable incurred in the
ordinary course of business and constituting Current Liabilities and the Earn-
Out Payment at any time prior to the date it becomes due and payable), and all
obligations of such Person under Capital Leases.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section
2.15(c) hereof.
"INITIAL EQUITY ISSUANCE" shall mean an initial public Issuance (other
than by virtue of a Takeout Financing) by the Successor Corporation of its
common stock in which (i) the aggregate Net Proceeds to the Successor
Corporation therefrom are equal to or greater than $25,000,000 in cash, and (ii)
the full Net Proceeds therefrom are applied in the manner set forth in Section
3.1(f) hereof.
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"INITIAL EURODOLLAR OFFICE" shall mean, for any Lender, the branch or
Affiliate of such Lender designated as the Initial Eurodollar Office of such
Lender in Schedule 1-d hereto.
"INTELLECTUAL PROPERTY" shall mean the "Proprietary Rights" (as such
term is defined in the Purchase Agreement) acquired by the Borrower in the
Acquisition and in the Comcast Acquisition, and all similar property hereafter
acquired, including, without limitation, all trademarks, tradenames, trade
secrets, servicemarks, patents and licenses (other than the FCC Licenses)
acquired by the Borrower on the Closing Date or hereafter acquired by the
Borrower or any Subsidiary.
"INTEREST COVERAGE RATIO" shall mean, for any four consecutive fiscal
quarter period, the ratio obtained by dividing (a) EBITDA of the Borrower and
its Subsidiaries on a combined basis for such fiscal period, by (b) Cash
Interest Expense for such fiscal period.
"INTEREST EXPENSE" shall mean, with respect to any Person for any
fiscal period, the excess, if any, of (i) cash interest expense of such Person
during such period determined in accordance with GAAP, and shall include in any
event, without limitation, interest expense with respect to Indebtedness for
Borrowed Money over (ii) interest income of such Person for such period.
"INTEREST PAYMENT DATE" shall mean, with respect to each Eurodollar
Advance, the last day of the Interest Period for such Eurodollar Advance;
provided, however, that with respect to each Interest Period for any Eurodollar
Advance of a duration of three or more months, the Interest Payment Date with
respect to such Eurodollar Advance shall include, in addition to the last day of
such Interest Period, each day which occurs every three months after the initial
date of such Interest Period.
"INTEREST PERIOD" shall mean, with respect to each Eurodollar Advance,
initially, the period commencing on, as the case may be, the borrowing or
conversion date with respect to such Eurodollar Advance and ending one, three or
six months thereafter, as selected by the Borrower; and thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Eurodollar Advance and ending one, three or six months thereafter, as
selected by the Borrower; provided, however, that no Interest Period may be
selected for a Eurodollar Advance which expires later than the Maturity Date;
provided, further, that no Interest Period may be selected for a Eurodollar
Advance with respect to the Term Loan which expires later than the next date for
a mandatory prepayment of the Term Loan under Section 3.1(a) hereof, unless that
portion of the outstanding principal balance of the Term Loan which is a Base
Rate Advance or which has Interest Periods which will expire on or before such
date is equal to or in excess of the amount of reduction or prepayment which
would be required pursuant to such Section 3.1(a) hereof; and provided, further,
that any Interest Period in respect of a Eurodollar Advance which begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall, subject to the foregoing proviso, end on the last Business Day of
a calendar month. Notwithstanding the above, all Interest Periods shall be
adjusted in accordance with Section 13.11 hereof.
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"INVENTORY" of any Person shall mean any and all inventory, raw
materials, work-in-process and finished products of such Person, now or
hereafter acquired, intended for sale or lease or to be furnished under
contracts of service in the ordinary course of business of such Person, of every
kind and description, in the custody or possession, actual or constructive, of
such Person including such inventory as is temporarily out of the custody or
possession of such Person.
"INVESTMENT" shall have the meaning set forth in Section 10.4 hereof.
"ISSUANCE" shall mean the issuance by any Credit Party or any of their
Subsidiaries after the Closing Date of Indebtedness for Borrowed Money (other
than the Term Loan, the Revolving Loan, the Letters of Credit and the other
Permitted Indebtedness), or the issuance of any equity interest (whether by
direct issuance or by virtue of rights, warrants, options, puts, calls, or other
like arrangements), provided, however, that issuances relating to the Specified
Transactions shall not constitute "Issuances" of debt or equity.
"ISSUING LENDER" shall have the meaning set forth in Section 4.1(a)
hereof.
"LAND" shall have the meaning set forth in the definition of Real
Estate.
"LANDLORD'S CERTIFICATE" shall have the meaning set forth in Section
5.1(a) hereof.
"LATEST PROJECTIONS" shall have the meaning set forth in Section 6.27
hereof.
"LEASE" shall mean each lease or sublease of real property existing
on the date hereof under which the Borrower or any of its Subsidiaries is the
lessee or sublessee and each future lease or sublease of real property under
which the Borrower or any of its Subsidiaries is the lessee or sublessee.
"LENDER" and "LENDERS" shall have the meanings set forth in the
preamble to this Agreement.
"LENDER DEBT" or "OBLIGATIONS" shall mean and include all Advances,
and all other Indebtedness owing at any time by the Borrower, any one or more of
its Subsidiaries or any other Credit Party to the Agent, UBS or any one or more
of the other Lenders or any Issuing Lender (including, without limitation, all
principal, interest, Letter of Credit reimbursement obligations, fees,
indemnities, costs, charges and other amounts payable to any Lender under any
Hedge Agreements, the Letter of Credit Agreements or in respect of the Letters
of Credit or owing under any of the other Loan Documents) arising under or in
connection with this Agreement, the Notes, any Security Document, any of the
other Loan Documents or any Guaranty in favor of the Agent or any one or more of
the Lenders or any Issuing Lender, in each instance, whether absolute or
contingent, secured or unsecured, due or not, arising by operation of law or
otherwise, and all interest and other charges thereon, including, without
limitation, post-petition interest whether or not such interest is an allowable
claim in a bankruptcy proceeding involving the Borrower, any of its Subsidiaries
or any other Credit Party, provided, however, that "Lender Debt" shall not
include any amounts due or owing (or otherwise claimed to be due or owing) (i)
to any Lender solely by virtue of and arising from its ownership of
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Partnership Interests, (ii) pursuant to the Guaranteed Loan Documents, or (iii)
with respect to the Guaranty Accrued Obligations.
"LETTER OF CREDIT AGREEMENT" shall mean an application and agreement,
as amended, modified or supplemented from time to time, with respect to the
issuance and reimbursement of and otherwise with respect to a Letter of Credit,
in form and substance satisfactory to the Agent.
"LETTER OF CREDIT CASH COLLATERAL" shall have the meaning set forth in
Section 3.1(b) hereof.
"LETTER OF CREDIT USAGE" shall mean, at any time, (a) the aggregate
undrawn amount at such time of all outstanding Letters of Credit, plus (b) the
aggregate amount of unreimbursed drawings at such time under Letters of Credit,
minus (c) the Letter of Credit Cash Collateral held by the Agent for 91 days as
of such time.
"LETTERS OF CREDIT" shall have the meaning set forth in the preamble
to this Agreement, and any extension, modification, amendment, renewal or
replacement thereof, and shall include, without limitation, all Rollover Letters
of Credit.
"LETTER OF NON-EXEMPTION" shall have the meaning set forth in Section
3.4(b) hereof.
"LEVERAGE RATIO" shall mean, at any time, the ratio obtained by
dividing (a) Total Borrowings at such time by (b) Net Worth of the Borrower and
its Subsidiaries on a combined basis at such time.
"LIEN" shall mean any lien, mortgage, pledge, security interest or
other type of charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of way or other
encumbrance on title to real property and any financing statement filed in
respect of any of the foregoing. For the purposes of this Agreement, a Credit
Party shall be deemed to be the owner of any property which it has placed in
trust for the benefit of the holder of Indebtedness of such Credit Party which
Indebtedness is deemed to be extinguished under GAAP but for which such Credit
Party remains legally liable, and such trust shall be deemed to be a Lien.
"LOAN DOCUMENTS" shall mean this Agreement, each Security Document,
each Mortgage, each Guaranty, the Notes, each Letter of Credit, each Letter of
Credit Agreement, the subordination provisions contained in the Subordinated
Loan Documents (including, without limitation, Section 8 of the Subordinated
Loan Agreement), each Borrower's Certificate, each Borrowing Base Certificate,
each Landlord's Certificate, each Hedge Agreement with a Lender, the FCC License
Letter and each other document or instrument now or hereafter delivered to the
Agent or any Lender by any Credit Party pursuant to or in connection herewith or
therewith, provided, however, that the Partnership Agreement and the Guaranteed
Loan Documents shall not constitute Loan Documents.
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"LOANS" shall mean, collectively, the Revolving Loan and the Term
Loan.
"MAJORITY LENDERS" shall mean at any time, either (A) Lenders holding
more than seventy-two and one-half percent (72.5%) (or, if Internationale
Nederlanden (U.S.) Capital Corporation is no longer a Lender, more than fifty
percent (50%)) of the sum of (i) the aggregate outstanding principal balance of
the Loans, (ii) the Letters of Credit (which shall be deemed to be held by the
Lenders in accordance with their exposure under Section 13.17 hereof), and (iii)
the aggregate amount of unutilized Commitments of the Lenders, in each case, at
such time, or (B) at least two Lenders (x) each of whom holds at least
$5,000,000 in Commitments hereunder, and (y) holding in the aggregate more than
fifty percent (50%) of the sum of (i) the aggregate outstanding principal
balance of the Loans, (ii) the Letters of Credit (which shall be deemed to be
held by the Lenders in accordance with their exposure under Section 13.17
hereof), and (iii) the aggregate amount of unutilized Commitments of the
Lenders, in each case, at such time.
"MANAGEMENT NOTES" shall mean, collectively, promissory notes in an
aggregate principal amount not to exceed $600,000, in substantially the form
attached hereto as Exhibit 1-m, representing indebtedness payable to the
Borrower by certain members of Muzak Management with respect to loans made by
the Borrower on the Closing Date to facilitate the purchase of Class B
Partnership Interests which management notes shall have a final maturity of not
later than the fourth anniversary of the Closing Date, all as reflected on
Schedule 1-e hereto.
"MANAGEMENT OPTION PLAN" shall mean the Management Option Plan of the
Borrower relating to Muzak Management and attached hereto as Exhibit 1-n, as
such plan may be amended, modified or supplemented from time to time in
accordance with the terms thereof and Section 10.12 hereof.
"MANAGING GENERAL PARTNER" shall mean MLP Acquisition, L.P., a
Delaware limited partnership, in its capacity as managing general partner under
the Partnership Agreement.
"MAS" shall have the meaning set forth in Section 12.15 hereof.
"MATERIAL ADVERSE EFFECT" shall mean, (a) a material adverse effect on
the business, operations, liabilities, assets, properties, prospects or
condition (financial or otherwise) of the Borrower and its Subsidiaries taken as
a whole (or of such other Person as may be specified), (b) the legal impairment
of (x) the ability of such Person to perform its material obligations under any
Loan Document to which it is a party, or (y) the ability of the Agent or any
Lender to enforce or collect on the Lender Debt or to realize on any material
amount of Collateral, or (c) the impairment of the Lien of the Agent or any
Lender on any material amount of Collateral or the priority of such Lien with
respect to a material amount of Collateral.
"MATERIAL DEFAULT" shall mean and include each of (i) any acceleration
of the Lender Debt; (ii) any Default under Section 11.1(i) hereof; (iii) any
Event of Default under Sections 11.1(a), (b), (f), (h), (l), or (n) hereof; and
(iv) any Event of Default under Section 11.1(c) arising out of a breach of
Sections 9.3(c), 9.17, 10.1, 10.5, 10.6 (other than clause (d)), 10.9 or 10.12
hereof.
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"MATURITY DATE" shall mean the date occurring on the earlier of (i)
the seventh anniversary of the New Closing Date, and (ii) the third anniversary
of the date of the payment in full of the Term Loan pursuant to the Takeout
Financing.
"MAXIMUM PERMISSIBLE RATE" shall have the meaning set forth in Section
2.21(a) hereof.
"MICROSPACE" shall mean MicroSpace Communications Corporation, a North
Carolina Corporation.
"MINIMUM ADVANCE AMOUNT" shall have the meaning set forth in Section
2.1(b) hereof.
"MLP" shall mean MLP Holdings L.P., a Delaware limited partnership.
"MLP COMMUNICATIONS COMPANY" shall mean MLP Communications Company, a
general partnership of which MLP Acquisition, L.P. and MLP Administration Corp.
are the general partners.
"MORTGAGE" shall have the meaning set forth in Section 5.4(a) hereof.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" (as defined in
Section 4001(a)(3) in ERISA) maintained or contributed to for employees of (i)
any Credit Party; or (ii) any ERISA Affiliate.
"MUZAK MANAGEMENT" shall mean the full-time members of operating
management of the Borrower from time to time, and on the New Closing Date "Muzak
Management" shall mean the persons listed on Schedule 1-f attached hereto.
"NET AMOUNT OF ELIGIBLE RECEIVABLES" for the Borrower and its
Subsidiaries, on a combined basis, shall mean, at any time, the gross amount of
the Eligible Receivables of the Borrower and its Subsidiaries, less sales,
excise or similar taxes, if any, included therein, and less returns, discounts,
claims, credits and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed with respect thereto, including, without
limitation, claims, credits or offsets of any bank or other third party in
respect of handling or similar charges in respect thereof (without duplication),
as indicated on the then most recent Borrowing Base Certificate of the Borrower
delivered to the Agent and the Lenders pursuant to Section 9.1(j) hereof.
"NET INCOME" shall mean, for any fiscal period, the net income (or net
loss) of the Borrower and its Subsidiaries on a combined basis as determined in
accordance with GAAP, provided, that, in no event shall Distributable Income
Taxes be subtracted from income in the determination of Net Income hereunder.
"NET PROCEEDS" shall mean, with respect to any Asset Sale or Issuance
by any Person and with respect to any Extraordinary Receipt or any insurance
proceeds received by the Borrower, any Credit Party or any Subsidiary of a
Credit Party, the aggregate amount of cash
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proceeds (after a reasonable estimate of taxes payable in connection therewith,
and, with respect to Asset Sales and Issuances only, payment of associated fees
and expenses (including, without limitation, reasonable fees and expenses of
counsel, accountants, appraisers and, with respect to any Issuance, any
reasonable underwriter's discount or private placement agent's fee) and, with
respect to Asset Sales and insurance proceeds only, the repayment of any
Indebtedness and/or other related liabilities secured specifically by and with a
first priority lien on the asset, the sale or disposition of which gave rise to
such Asset Sale or payment of insurance proceeds) received by such Person from
such Asset Sale or Issuance or with respect to such Extraordinary Receipt or
insurance proceeds, and any cash proceeds paid from time to time under any
promissory note or other instrument or security delivered in connection with any
such Asset Sale or Issuance or with respect to such Extraordinary Receipt or
insurance proceeds.
"NET WORTH" of the Borrower and its Subsidiaries shall mean, at any
time, the total of all assets appearing on a combined balance sheet of such
Persons prepared in accordance with GAAP, minus (i) the total of all liabilities
appearing on such combined balance sheet at such time, minus (ii) Distributable
Income Taxes relating to the fiscal period being measured at such time.
"NEW CLOSING DATE" shall mean the date and time on which the Term Loan
is made to the Borrower under the Agreement (and which date, in any event, shall
be no later than January 31, 1994).
"NEW REQUIRED CONSENTS" shall mean those consents listed on Schedule
4.3 to the Comcast Purchase Agreement.
"NOTES" shall mean the Term Notes and the Revolving Notes.
"OPTION AGREEMENTS" shall mean that certain Option Agreement and the
related Letter Agreement, dated the Closing Date, between Barclays and the
Borrower, pursuant to which (i) the Borrower shall have the right to put to
Barclays, (ii) Barclays shall have the right to call from the Borrower, 977,089
units of Partnership Interests in the form of Class A-2 Partnership Interests,
and (iii) Barclays shall be granted certain other rights, including certain
registration rights with respect to Partnership Interests that it may hold,
which agreements shall be substantially in form attached hereto as Exhibit 1-o.
"ORIGINAL CREDIT AGREEMENT" shall have the meaning set forth in the
preamble to this Agreement.
"ORIGINAL NOTES" shall mean the Original Revolving Notes and the
Original Term Notes, collectively.
"ORIGINAL REVOLVING ADVANCES" shall mean the revolving advances made
by the Lenders pursuant to the Original Credit Agreement.
"ORIGINAL REVOLVING NOTES" shall mean each of the promissory revolving
notes issued pursuant to the Original Credit Agreement by the Borrower and
payable to the order of a Lender, in the aggregate maximum principal amount of
$6,000,000.
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"ORIGINAL TERM LOAN" shall mean the term loan made by the Lenders
pursuant to the Original Credit Agreement.
"ORIGINAL TERM NOTES" shall mean each of the promissory term notes
issued pursuant to the Original Credit Agreement by the Borrower and payable to
the order of a Lender, in the aggregate maximum principal amount of $27,500,000.
"OTHER TAXES" shall have the meaning set forth in Section 3.4(c)
hereof.
"PARTNERS" shall mean the General Partners and the other holders of
Partnership Interests from time to time.
"PARTNERSHIP AGREEMENT" shall mean the Second Amended and Restated
Agreement of Limited Partnership of Muzak Limited Partnership, a Delaware
limited partnership, dated as of January 31, 1994, as in effect on the date
hereof and as amended in accordance with the terms thereof and Section 10.12(b)
hereof.
"PARTNERSHIP INTERESTS" shall mean the General Partnership Interests,
the Class A-1 Partnership Interests, the Class A-2 Partnership Interests, the
Class B Partnership Interests and the Class C Partnership Interests.
"PAYMENT OFFICE" shall have the meaning set forth in Section 2.7(c)
hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereof under ERISA.
"PENSION BENEFIT PLAN" shall mean any Employee Plan which is an
"employee pension benefit plan," as defined in Section 3(2) of ERISA.
"PERMITTED INDEBTEDNESS" shall have the meaning set forth in Section
10.3 hereof.
"PERMITTED LIENS" shall have the meaning set forth in Section 10.2
hereof.
"PERMITTED SALE" shall mean a sale, conveyance, transfer or other
disposition of all or substantially all of the Partnership Interests or assets
of the Borrower pursuant to which all Centre Partners Entities (taken as a
whole) shall sell not less than 95% of their aggregate economic interests in the
Borrower or any other entity holding all or substantially all of the Assets and
pursuant to which 100% of the Lender Debt is indefeasibly paid in full.
"PERSON" shall mean an individual, a corporation, an association, a
joint stock company, a business trust, a partnership, a trust, a joint venture,
a trade or business, an unincorporated organization or other entity, or a
government or any agency or political subdivision thereof or any other entity of
whatever nature.
"PLEDGE AGREEMENT" shall have the meaning set forth in Section 5.8
hereof.
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"PRO RATA" shall mean, with respect to each Lender, a percentage equal
to the ratio that (i) with respect to the Term Loan, the Term Loan Commitment of
such Lender bears to the Aggregate Term Loan Commitments, (ii) with respect to
the Revolving Loan, the Revolving Commitment of such Lender bears to the
Aggregate Revolving Commitments, and (iii) in all other instances, the
Commitment of such Lender bears to the Commitments of all the Lenders.
"PROPERTY" shall mean any real or personal property, plant, building,
facility, structure, underground storage tank, equipment or unit, or other asset
owned, leased or operated by the Borrower or any of its Subsidiaries (including
any surface water thereon or adjacent thereto, and soil or groundwater
thereunder).
"PURCHASE AGREEMENT" shall mean that certain Asset Purchase Agreement,
dated as of March 11, 1992, (as amended by Amendment No. 1, dated as of June 26,
1992, Amendment No. 2, dated as of July 31, 1992 and Amendment No. 3, dated as
of August 26, 1992) among the Borrower, the Company, Field/Muzak, Inc. and The
Field Corporation.
"PURCHASE DOCUMENTS" shall mean the Purchase Agreement, the Disclosure
Schedules, the Bill of Sale, the form of Earn-Out Note, and each other document,
instrument or agreement executed in connection with the Acquisition.
"PUT AND CALL" shall mean that certain Put and Call Agreement, dated
the New Closing Date, between UBS and MLP, in substantially the form attached
hereto as Exhibit 1-p, as such agreement may be amended, modified or
supplemented from time to time in accordance with its terms.
"REAL ESTATE" shall mean all of those plots, pieces or parcels of land
now owned or hereafter acquired or now leased or hereafter leased by the
Borrower or any of its Subsidiaries or any interest therein (the "LAND"),
including, without limitation, those listed on Schedule 12.5(a)-2 hereto and
more particularly described in the Mortgage, together with the right, title and
interest of the Borrower or any of its Subsidiaries, if any, in and to the
buildings or improvements, the streets, the land lying in the bed of any
streets, roads or avenues, opened or proposed, in front of, adjoining, or
abutting the Land to the center line thereof, all strips and gores abutting or
adjoining the Land, the air space and development rights pertaining to the Land
and right to use such air space and development rights, all rights of way,
privileges, liberties, tenements, hereditaments, and appurtenances belonging or
in any way appertaining thereto, unpaid awards from any condemnation or eminent
domain proceedings by reason of a widening or change of grade of any streets,
any insurance proceeds resulting from any casualty or other damage to the
buildings and other improvements on the Land, all fixtures and equipment
attached or appurtenant to the Land, all easements and alleys, access, drainage
and other rights now or hereafter benefiting the Land and all royalties and
rights appertaining to the use and enjoyment of the Land, including, without
limitation, all mineral, water, oil, coal, gas, timber and other similar rights,
together with all of the buildings and other improvements now or hereafter
erected on the Land, all fixtures and all additions thereto and substitutions
and replacements thereof.
"RECEIVABLES" shall mean and include all accounts, contract rights,
instruments, documents, chattel paper and general intangibles, whether secured
or unsecured, now existing
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or hereafter created, of the Credit Parties, and whether or not specifically
sold or assigned to the Agent or the Lenders.
"REFERENCE PROJECTIONS" shall have the meaning set forth in Section
6.27 hereof.
"REGULATION D" shall mean Regulation D of the Board as from time to
time in effect and any successor to all or a portion thereof establishing
reserve requirements.
"RELEASE" shall mean any releasing, spilling, leaking, seepage,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping, as defined by Environmental Law. The meaning of
the term shall also include any Threatened Release, as defined by Environmental
Law.
"REPORTABLE EVENT" shall have the meaning set forth in Section 4043(b)
of ERISA, and the regulations thereunder, as to which the PBGC has not by
regulation waived the notice requirement of Section 4043(a) of ERISA.
"REQUIRED CONSENTS" shall mean those consents listed on Schedule 8.8
to the Purchase Agreement.
"REVOLVING ADVANCE" shall have the meaning set forth in Section 2.1(a)
hereof.
"REVOLVING COMMITMENT", as to any Lender, shall have the meaning set
forth in Section 2.2(b) hereof. For purposes of Sections 2.12, 2.15 and 4.4
hereof, the Revolving Commitment of any Lender shall include the participation
interest of such Lender in Letters of Credit as provided in Section 13.17
hereof.
"REVOLVING CREDIT FACILITY" shall mean the facility provided to the
Borrower hereunder to make borrowings of Revolving Advances and to cause the
issuance by the Issuing Lenders of Letters of Credit.
"REVOLVING CREDIT FACILITY COMMITMENT" shall have the meaning set
forth in Section 2.2(a) hereof.
"REVOLVING LOAN" shall have the meaning set forth in Section 2.1(a)
hereof.
"REVOLVING NOTE" and "REVOLVING NOTES" shall have the meanings set
forth in Section 2.4(a) hereof.
"ROLLOVER EURODOLLAR ADVANCES" shall mean those Eurodollar Advances
outstanding pursuant to this Agreement (as in effect prior to the Amendment and
Restatement effectuated hereunder) immediately prior to the New Closing Date
with Interest Periods that extend beyond the New Closing Date, each as described
on Schedule 1-g attached hereto.
"ROLLOVER LETTERS OF CREDIT" shall mean those Letters of Credit
outstanding pursuant to this Agreement (as in effect prior to the Amendment and
Restatement effectuated
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hereunder) immediately prior to the New Closing Date with expiry dates that
extend beyond the New Closing Date, each as described on Schedule 1-g attached
hereto.
"SECURITY AGREEMENT" shall have the meaning set forth in Section
5.1(a) hereof.
"SECURITY DOCUMENT" and "SECURITY DOCUMENTS" shall have the meanings
set forth in Section 5.1(a) hereof.
"SOLVENT" and "SOLVENCY" shall mean, with respect to any Person on a
particular date, that on such date, (a) the fair saleable value of the assets of
such Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person; and (b) the present fair
salable value of the assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as they
become absolute and matured; and (c) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature; and (d) such Person is not
engaged in business or a transaction, and is not about to engage in business or
a transaction, for which such Person's property would constitute an unreasonably
small capital.
"SPECIAL DEPOSIT" shall have the meaning set forth in Section 3.2(c)
hereof.
"SPECIAL SUBORDINATED DEBT" shall have the meaning set forth in the
definition of 'Special Subordinated Takeout Financing'.
"SPECIAL SUBORDINATED TAKEOUT FINANCING" shall mean an issuance by the
Borrower, at any time on or prior to the Guaranteed Loan Maturity Date of (A) up
to $5,000,000 principal amount of subordinated debt (which indebtedness shall
not (i) accrue cash interest in excess of 12.5% per annum, (ii) provide for the
payment of any portion of the principal thereunder prior to 8 years from the
date of issuance, or (iii) rank higher than pari passu in priority with the
Subordinated Notes (the "SPECIAL SUBORDINATED DEBT")), or (B) any equity
interest of the Borrower (whether by direct issuance or by virtue of rights,
warrants, options, puts, calls, or other like arrangements) (other than an
Initial Equity Issuance) and that does not require cash payments with respect
thereto during the term of this Agreement, whether by dividend, interest or
otherwise, of which the full cash purchase price of such Special Subordinated
Takeout Financing shall be applied in the manner set forth in Section 3.1(g)
hereof (and subject to specified circumstances and pursuant to the terms and
conditions set forth in the Guaranteed Note and the Put and Call), all on terms
and conditions, and pursuant to documentation, reasonably satisfactory to the
Borrower and the Agent.
"SPECIFIED TRANSACTIONS" shall mean and include: (1) non-cash
payments of distributions on the Class C Partnership Interests; (2) the
conversion of the Class C Partnership Interests into Class C Exchange Notes
pursuant to Section 16.02 of the Partnership Agreement and the accrual of non-
cash interest thereon; (3) non-cash payments of distributions on the Class C-1
Partnership Interests and mandatory cash payments of distributions on the Class
C-1 Exchange Notes as provided in Section 17.02(a) of the Partnership Agreement;
(4) the conversion of the Class C-1 Partnership Interests into Class C-1
Exchange Notes pursuant to Section 17.02 of the Partnership Agreement and the
accrual of non-cash interest thereon; (5) the issuance of the Class C-1
Participation Option as provide (and as defined) in Section 17.02 of the
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Partnership Agreement and the issuance of the Class C-1 Partnership Interests
upon the exercise thereof; (6) the reclassification (including an adjustment in
the number) of Class C-1 Partnership Interests upon the occurrence of a Class C-
1 Participation Event (as such term is defined in the Partnership Agreement; (7)
the issuance of Earn-out Notes pursuant to Section 2.5 of the Purchase Agreement
and the accrual of non-cash interest thereon; (8) the issuance and exercise of
Class B Partnership Interest options, and the issuance of Class B Partnership
Interests upon the exercise thereof, to Muzak Management pursuant to the
Management Option Plan; (9) the issuance of the Management Notes; (10) the
issuance of Class A-2 Partnership Interests to Barclays (or an Affiliate of
Barclays) pursuant to the Option Agreements; (11) the purchase by the Borrower
of Class B Partnership Interests from former members of Muzak Management (or
their permitted transferees) and the settlement of options held by Muzak
Management, in each case for cash (only if no Default or Event of Default is
continuing or would occur as a result of making such cash payment and subject in
all cases to the prior or simultaneous payment of all amounts due from the
applicable employee under his or her respective Management Notes, which
Management Notes shall be satisfied in full prior to any payment of any cash in
respect of the settlement of options or purchase of Class B Partnership
Interests from such employee) (provided that, to the extent any member of Muzak
Management, within 20 days of the settlement in cash of his or her options,
utilizes such cash to purchase Class B Partnership Interests in the Borrower,
such cash amount need not be applied to such person's Management Notes) or in
"Permitted Securities" (as defined in the Partnership Agreement), all under this
clause (11) in an aggregate cost (together with all amounts loaned by the
Borrower pursuant to clause (12) below in such twelve month period) not to
exceed $500,000 in any twelve month period; and (12) so long as no Default or
Event of Default is continuing, a loan or loans by the Borrower to the
Administrative General Partner of funds pursuant to Section 11.14(d) of the
Partnership Agreement (as in effect on the New Closing Date) under this clause
(12) in an aggregate amount (together with all amounts loaned by the Borrower
pursuant to clause (11) above in such twelve month period) not to exceed
$500,000 in any twelve month period.
"SUBORDINATED GUARANTY" shall mean each guaranty by a Subsidiary of
the Borrower in favor of the holders of the Subordinated Indebtedness, provided,
that, each such guaranty shall be expressly subordinate to the Lender Debt
pursuant to Section 8 of the Subordinated Loan Agreement and shall otherwise be
in form and substance satisfactory to the Agent.
"SUBORDINATED INDEBTEDNESS" shall mean the indebtedness of the
Borrower represented, from time to time, by the Earn-Out Note, the Class C
Exchange Notes, the Class C-1 Exchange Notes and the Subordinated Notes, and, if
incurred, the Special Subordinated Debt.
"SUBORDINATED LOAN AGREEMENT" shall mean that certain Subordinated
Loan Agreement, dated as of the Closing Date, between the Borrower and Barclays.
"SUBORDINATED LOAN DOCUMENTS" shall mean the Subordinated Loan
Agreement, the Subordinated Notes, the Option Agreements, each Subordinated
Guaranty and each other document or instrument now or hereafter delivered
pursuant to or in connection with the Subordinated Notes and in substantially
the forms attached hereto as Exhibit 1-q, as such documents may be amended,
supplemented or otherwise modified from time to time in accordance with its
respective terms and in accordance with Section 10.12 hereof.
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<PAGE>
"SUBORDINATED NOTES" shall mean the Borrower's senior subordinated
notes, in the form of Exhibit 1-r hereto, in the original principal amount of
$7,500,000, issued by the Borrower initially to Barclays, together with any
amendment, modification, renewal or substitution of any thereof issued pursuant
to and governed by the Subordinated Loan Documents.
"SUBORDINATION AGREEMENTS" shall mean, collectively, the Subordinated
Notes, the Earn-Out Subordination Agreement, the Class C Exchange Note
Subordination Agreement, the Class C-1 Exchange Note Subordination Agreement,
and the Subordinated Loan Documents (including, without limitation, Section 8 of
the Subordinated Loan Agreement).
"SUBSIDIARY" of any Person shall mean (a) any corporation of which
more than fifty percent (50%) of the issued and outstanding securities having
ordinary voting power for the election of directors is owned or controlled,
directly or indirectly, by a Person and/or one or more of its Subsidiaries, and
(b) any partnership in which a Person and/or one or more Subsidiaries of such
Person shall have a general partnership interest or any other interest (whether
in the form of voting or participation in profits or capital contribution), in
each case, of more than fifty percent (50%). Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.
"SUCCESSOR CORPORATION" shall have the meaning set forth in Section
9.6 hereof.
"SUPERVISORY POLICY" shall have the meaning set forth in Section
10.4(b) hereof.
"TAKEOUT FINANCING" shall mean a public offering or private placement
by the Borrower (or the Successor Corporation) on or prior to the Guaranteed
Loan Maturity Date of certain securities on terms and conditions, and pursuant
to documentation, reasonably satisfactory to the Borrower and the Agent, the Net
Proceeds of which shall be at least equal (and shall be applied) to all amounts
outstanding (including accrued and unpaid interest, fees and expenses) under the
Term Loan, the Indebtedness under the Subordinated Notes, and the Guaranteed
Loan, provided, however, in no event shall the gross proceeds from a Takeout
Financing be in excess of $70,000,000.
"TERM LOAN" shall have the meaning set forth in Section 2.5(a) hereof.
"TERM LOAN COMMITMENT" shall have the meaning set forth in Section
2.5(a) hereof.
"TERM NOTE" and "TERM NOTES" shall have the meaning set forth in
Section 2.6 hereof.
"TOTAL BORROWINGS" of the Borrower and its Subsidiaries at any time
shall mean the sum of (a) the aggregate Indebtedness for Borrowed Money of the
Borrower and its Subsidiaries at such time (excluding the Revolving Advances,
Letter of Credit Usage and intercompany Indebtedness for Borrowed Money), plus
(b) the average outstanding amount of the
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Revolving Advances and Letter of Credit Usage under this Agreement during the
12-month period ending at such time.
"TRADEMARK, PATENT AND COPYRIGHT SECURITY AGREEMENT" shall have the
meaning set forth in Section 5.2 hereof.
"TRANSFERORS" shall have the meaning set forth in the preamble to this
Agreement.
"UBS" has the meaning set forth in the preamble to this Agreement.
"UBS ACCOUNT" shall have the meaning set forth in Section 9.18 hereof.
"UCC" shall mean the Uniform Commercial Code (or any successor
statute) of the State of New York or of any other state the laws of which are
required by Section 9-103 of the UCC of New York to be applied in connection
with the perfection of a security interest in favor of the Agent hereunder or
under any Security Document.
"U.S. DOLLARS", "DOLLARS" and "$" shall mean lawful currency of the
United States of America.
"WORKING CAPITAL" shall mean at any time, all accounts, prepaid
expenses and other Current Assets of the Borrower and its Subsidiaries,
excluding cash, at such time, minus Current Liabilities of the Borrower and its
Subsidiaries at such time.
"WRITTEN NOTICE" and "IN WRITING" shall mean any form of written
communication or a communication by means of telex, telecopier device, telegraph
or cable.
(S) 1.2. Terms Defined in the Uniform Commercial Code. Each term
--------------------------------------------
defined in the UCC of the State of New York and used herein shall have the
meaning given therein unless otherwise defined herein.
(S) 1.3. Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" shall mean "from and including" and the words "to" and "until"
each shall mean "to but excluding."
(S) 1.4. Accounting Terms. (a) All accounting terms not
----------------
specifically defined herein shall be construed, as to a specified Person, in
accordance with generally accepted accounting principles in the United States as
in effect from time to time, consistent with those applied in the preparation of
the financial statements of such Person ("GAAP").
(b) If any changes in accounting principles from those used in the
preparation of the financial statements referred to in Section 6.2(a) hereof are
hereafter occasioned by promulgation of rules, regulations, pronouncements or
opinions by or are otherwise required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions), and any of such changes results in
a change in the method of calculation of, or affects the results of such
calculation of, any of the financial covenants, standards or terms found herein,
then the parties hereto agree to
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enter into and diligently pursue negotiations in order to amend such financial
covenants, standards or terms so as to equitably reflect such changes, with the
desired result that the criteria for evaluating a Credit Party's financial
condition and results of operations shall be the same after such changes as if
such changes had not been made.
(S) 1.5. Other Provisions Regarding Definitions. (a) The words
--------------------------------------
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
(b) The terms defined in this Section 1, unless the context requires
otherwise, will have the meanings applied to them in this Section 1, references
to an "Exhibit," "exhibit," "Schedule" or "schedule" are, unless otherwise
specified, to one of the exhibits or schedules attached to this Agreement and
references to a "Section" or "Section" are, unless otherwise specified, to one
of the Sections of this Agreement.
(c) References to the "date hereof," the "date of this Agreement" and
the like shall mean and refer to January 31, 1994.
(d) The term "or" is not exclusive, but does not mean "and" or
"including, without limitation".
SECTION 2. AMOUNT AND TERMS
(S) 2.1. Revolving Advances. (a) Each of the Lenders severally
------------------
agrees to lend to the Borrower, subject to and upon the terms and conditions
herein set forth, at any time or from time to time on or after the New Closing
Date and before the Maturity Date, such Lender's pro rata share, as determined
under Section 2.7(c) hereof, of such amounts as may be requested or be deemed
requested by the Borrower in accordance with the terms of this Agreement (each
such borrowing, a "REVOLVING ADVANCE" and the outstanding principal balance of
all Revolving Advances from time to time, the "REVOLVING LOAN"), subject to the
limitations contained in Section 2.2 hereof; provided, that, the Borrowers shall
be deemed to have requested and the Lenders shall be deemed to have made, as of
the New Closing Date, Revolving Advances equal to the principal amount of the
Rollover Eurodollar Advances.
(b) Each Revolving Advance shall be in an amount equal to $250,000
(the "MINIMUM ADVANCE AMOUNT") or an integral multiple of $100,000 in excess
thereof and shall be made on the date specified in the Written Notice or
telephonic notice confirmed in writing as described in Section 2.7 hereof;
provided, however, that if the Borrower shall be deemed to request a Revolving
Advance under Section 4.1(c) hereof, no notice of a borrowing shall be necessary
and such Revolving Advance shall be in an amount equal to the greater of (i) the
reimbursement obligation of the Borrower for the drawing made under the Letter
of Credit for which such Revolving Advance is deemed requested, and (ii) the
Minimum Advance Amount. Each Revolving Advance shall be either a Base Rate
Advance or a Eurodollar Advance, or a combination thereof, as the Borrower shall
request, subject to and in accordance with the provisions of this Agreement.
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(S) 2.2. Revolving Credit Facility Commitment and Borrowing Limit.
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(a) The aggregate unpaid principal amount of the Revolving Advances outstanding
at any time shall not exceed an amount equal to the lesser of (i) $8,000,000
minus the Letter of Credit Usage at such time (after giving effect to any
concurrent reimbursement of a Letter of Credit with the proceeds of a Revolving
Advance pursuant to Section 4.1(c) hereof) (such amount, or such lesser amount
after giving effect to each reduction pursuant to Section 2.8 hereof, the
"REVOLVING CREDIT FACILITY COMMITMENT"), and (ii) the Borrowing Base as of such
time minus the Letter of Credit Usage at such time (after giving effect to any
concurrent reimbursement of a Letter of Credit with the proceeds of a Revolving
Advance pursuant to Section 4.1(c) hereof) (the lesser of (i) and (ii) being the
"BORROWING LIMIT").
(b) Subject to the limitations of Sections 2 and 3 hereof, the
Borrower may borrow, repay (without premium or penalty) and reborrow the
Revolving Loan. The portion of the Revolving Loan to be funded by each Lender
shall not exceed in aggregate principal amount at any one time outstanding, and
no Lender shall have any obligation to make its pro rata share of any Revolving
Advance which shall result in such Lender's share of the Revolving Loan at such
time plus such Lender's share of the Letter of Credit Usage at such time being
in the aggregate in excess of, the revolving commitment amount set forth
opposite such Lender's name on Schedule 2.2 hereto for the Revolving Credit
Facility Commitment (for each Lender its "REVOLVING COMMITMENT").
(c) The Revolving Advance made on the New Closing Date (other than
the Rollover Eurodollar Advances) shall initially be a Base Rate Advance;
provided, however, that the Borrower may convert such Revolving Advance or a
portion thereof to a Eurodollar Advance subject to and in accordance with the
terms and conditions of this Agreement.
(S) 2.3. Revolving Credit Facility Following a Takeout Financing.
-------------------------------------------------------
Upon the payment in full of the Term Loan, the Indebtedness under the
Subordinated Notes and the Guaranteed Loan pursuant to a Takeout Financing, the
Borrower and UBS (but not each other Lender) hereby agree that (i) the Revolving
Credit Facility shall continue in full force and effect until the Maturity Date
(unless otherwise terminated in accordance with the terms hereof), (ii) the
Security Documents will be modified to provide that the Revolving Credit
Facility will be secured solely by a first priority security interest in the
Receivables, Related Contracts, Inventory and Proceeds thereof (each, as defined
in the Security Agreement) of the Borrower and its Subsidiaries, and (iii) the
covenants set forth in Sections 9 and 10 of this Agreement, including the
financial covenants set forth therein, shall be modified to reflect the Takeout
Financing, in a manner mutually satisfactory to the Agent and the Borrower.
(S) 2.4. Revolving Notes. (a) The pro rata portion of the Revolving
---------------
Advances made by each Lender to the Borrower shall be evidenced by, and be
repayable with interest in accordance with the terms of, a promissory note
issued by the Borrower, in each case payable to the order of such Lender, and in
the maximum principal amount of such Lender's Revolving Commitment, in the form
of Exhibit 2.4 hereto (together with any replacement, modification, renewal or
substitution thereof, individually, a "REVOLVING NOTE" and collectively, the
"REVOLVING NOTES"). Each Revolving Note shall be dated the Closing Date and be
duly completed, executed and delivered by the Borrower.
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(b) Each Lender shall endorse that portion of the amount of each
Revolving Advance which it has made to the Borrower and the amount of each
payment or prepayment of principal thereon in the appropriate space on the grid
sheet attached to its Revolving Note (or so note the same in its records);
provided, however, that the failure of any Lender to make any such endorsement
or recordation shall not in any manner affect the obligation of the Borrower to
repay to such Lender the portion of the Revolving Advance advanced by such
Lender under the Revolving Note held by such Lender. Any such endorsement or
recordation shall represent conclusive evidence of the date and amount of such
Lender's pro rata share of any Revolving Advance or payment or prepayment of
principal thereon, absent manifest error.
(c) Each of the Revolving Notes shall mature on the earlier of (i)
the Maturity Date (or earlier as hereinafter provided), and (ii) the complete
repayment in full of the Term Loan (unless such complete repayment is made from
the proceeds of a Takeout Financing), and shall be subject to payment and
prepayment of all other amounts as provided in Sections 2 and 3 hereof,
including Section 2.8 and, if applicable, Section 3.7 hereof.
(S) 2.5. Term Loan; Term Loan Commitment; Availability. (a) Each of
---------------------------------------------
the Lenders severally agrees to lend to the Borrower hereunder, subject to and
upon the terms and conditions herein set forth below, an amount (for each
Lender, its "TERM LOAN COMMITMENT") equal to the product obtained by multiplying
(i) such Lender's Term Loan percentage set forth opposite such Lender's name on
Schedule 2.2 hereto, by (ii) $46,600,000 (the outstanding principal balance of
such loan, from time to time, the "TERM LOAN"). Amounts borrowed under this
Section 2.5(a) and repaid or prepaid may not be reborrowed.
(b) The Term Loan shall initially be a Base Rate Advance (other than
the Rollover Eurodollar Advance); provided, however, that the Borrower may
convert the Term Loan or a portion thereof to a Eurodollar Advance subject to
and in accordance with the terms and conditions of this Agreement.
(S) 2.6. Term Notes. The pro rata portion made by each Lender to the
----------
Borrower of the Term Loan shall be evidenced by, and be repayable with interest
in accordance with the terms of, a promissory note payable to the order of such
Lender in the maximum principal amount of the Term Loan Commitment of such
Lender, in the form of Exhibit 2.6 hereto (together with any replacement,
modification, renewal or substitution thereof, individually, a "TERM NOTE" and
collectively, the "TERM NOTES"), which shall be dated the Closing Date and be
duly completed, executed and delivered by the Borrower. Each of the Term Notes
shall be subject to payment and prepayment as provided in Section 3 hereof.
(S) 2.7. Notice of Borrowing; Borrower's Certificate. (a) Except as
-------------------------------------------
provided in Section 4.1(c) hereof, whenever the Borrower desires to make a
borrowing of a Revolving Advance or of the Term Loan, it shall give the Agent,
at its address set forth in Section 13.4 hereof, not later than 2:00 p.m. (New
York time), at least three (or, in the case of a Revolving Advance which shall
be a Base Rate Advance, two) Business Days' prior Written Notice or telephonic
notice from an Authorized Representative confirmed promptly in writing (which
notice shall be irrevocable) of its desire to make a borrowing of a Revolving
Advance or of the Term Loan. Each notice of borrowing under this Section 2.7
shall be substantially in the form of Exhibit 2.7 hereto (each a "BORROWER'S
CERTIFICATE") and specify the date on which the Borrower
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desires to make a borrowing of a Revolving Advance or of the Term Loan (which in
each instance shall be a Business Day), the amount of such borrowing, whether
such borrowing shall be a Base Rate Advance or a Eurodollar Advance or a
combination thereof, whether such borrowing shall be a Revolving Advance or the
Term Loan, and in the case of the selection of a Eurodollar Advance, the
proposed Interest Period therefor, and, in the case of a Revolving Advance,
shall refer to the most recent Borrowing Base Certificate delivered by the
Borrower to the Agent and each Lender pursuant to Section 9.1(j) hereof, and set
forth the Borrowing Base provided therein. If such notice shall be with respect
to a borrowing of a Eurodollar Advance but fails to state an applicable Interest
Period therefor, then such notice shall be deemed to be a request for a one-
month Interest Period. If (x) the Borrower shall fail to state in any such
notice whether such Advance shall be a Base Rate Advance or a Eurodollar
Advance, or (y) the Borrower shall be deemed to have made a borrowing of a
Revolving Advance pursuant to Section 4.1(c) hereof, then the Borrower shall be
deemed to have selected a Base Rate Advance. Subject to the other provisions of
this Agreement, Base Rate Advances and Eurodollar Advances of more than one type
may be outstanding at the same time; provided, however, that Eurodollar Advances
shall be available for election by the Borrower only for (i) Advances of
$1,500,000 or any integral multiple of $500,000 in excess of $1,500,000, and
(ii) one, three and six month Interest Periods (provided, that, for the initial
sixty days following the Closing Date, the Borrower may select only one month
Interest Periods with respect to Eurodollar Advances). The Agent shall promptly
give each Lender telephonic notice (confirmed promptly in writing) of the
proposed Revolving Advance or the Term Loan, as the case may be, of such
Lender's pro rata share thereof, and of the other matters covered by the
Borrower's Certificate.
(b) The Borrower shall not be permitted to select a borrowing of a
Eurodollar Advance in any Borrower's Certificate (x) to the extent such
selection would be prohibited by Sections 2.13 or 2.14 hereof, or (y) if a
Default or an Event of Default shall be in existence as of the date of selection
of the applicable Interest Period.
(c) Each Lender shall make available to the Agent such Lender's pro
rata portion of the Revolving Advance or the Term Loan, as the case may be, to
be made on the date specified in the Borrower's Certificate (which for purposes
of Revolving Advances made pursuant to Section 4.1(c) hereof shall be deemed to
be the Business Day after the Business Day of receipt of the Written Notice or
telephonic notice by the Agent to each Lender of such borrowing) no later than
12:00 noon (New York time) on such specified date, in U.S. dollars in
immediately available funds, at the office of the Agent located at 299 Park
Avenue, New York, New York or such other office as the Agent may from time to
time direct (the "PAYMENT OFFICE") for the account of such office of the Agent.
The portion of each Revolving Advance to be funded by each Lender shall be an
amount equal to (x) the dollar amount of the Revolving Advance requested under
Section 2.1(a) hereof or deemed requested by the Borrower under Section 4.1(c)
hereof, multiplied by (y) the percentage set forth opposite such Lender's name
on Schedule 2.2 hereto with respect to such Lender's Revolving Commitment.
(d) Except for Revolving Advances made pursuant to Section 4.1(c)
hereof (which Revolving Advances shall be applied to the reimbursement of
drawings under the Letter of Credit for which such Revolving Advance was made in
accordance with such Section 4.1(c) hereof), subject to satisfaction of all
applicable conditions precedent, proceeds of each Revolving Advance and of the
Term Loan received by the Agent shall be made available to the Borrower
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by the Agent at its Payment Office (or such other office of the Agent in New
York State as the Borrower may from time to time specify in writing to the
Agent).
(S) 2.8. Termination or Reduction of Revolving Credit Facility
-----------------------------------------------------
Commitments. Upon the payment in full of the Term Loan (unless such payment in
- -----------
full of the Term Loan is made from the Net Proceeds of the Takeout Financing)
the Revolving Credit Facility Commitment shall be cancelled and all Revolving
Loans (together with all other Lender Debt) shall be cancelled. Upon such
cancellation, the Revolving Advances (together with all other Lender Debt) shall
become automatically immediately due and payable together with all accrued
interest thereon to such date plus any fees, premiums, charges or costs provided
for hereunder, together with the cancellation or termination of any outstanding
Letters of Credit (or the providing of Letter of Credit Cash Collateral equal to
the undrawn amount of all Letters of Credit), and the reimbursement of any
unreimbursed Letters of Credit, provided, however that any such termination of
the Revolving Commitments while Revolving Advances, or portions thereof, which
are Eurodollar Advances are outstanding shall be made only on the last day of
the respective Interest Periods for such Eurodollar Advances. Notwithstanding
the foregoing, the Revolving Commitments shall not be terminated in full as long
as any Letters of Credit remain outstanding or unreimbursed, provided, that, the
Lenders shall no longer have any obligation to make Revolving Advances
hereunder.
(S) 2.9. Interest. (a) INTEREST ON EURODOLLAR ADVANCES. Except as
--------
provided in Sections 2.9(c) and 2.9(f) hereof, the Borrower shall pay interest
(without duplication) on the unpaid principal amount of each Eurodollar Advance
made to it outstanding from time to time, on each Interest Payment Date with
respect to such Eurodollar Advance, at the date of conversion of such Eurodollar
Advance (or portion thereof) to a Base Rate Advance and at maturity of such
Eurodollar Advance at an interest rate per annum equal to the Adjusted
Eurodollar Rate for the Interest Period in effect for such Eurodollar Advance
plus (x) at any time prior to the date of the closing of the Initial Equity
Issuance, three percentage points (3%) and (y) on and following the date of the
closing of the Initial Equity Issuance, one and one-half percentage points
(1.5%), and after maturity of such Eurodollar Advance (whether by acceleration
or otherwise) upon demand.
(b) INTEREST ON BASE RATE ADVANCES. Except as provided in Sections
2.9(c) and 2.9(f) hereof, the Borrower shall pay interest on the unpaid
principal amount of the Base Rate Advances made to it hereunder, and, to the
extent due and payable, Additional Indebtedness incurred by it, in each case,
outstanding from time to time at an interest rate per annum equal to the Base
Rate in effect from time to time. Interest on Base Rate Advances shall be
payable quarterly in arrears on the last day of each March, June, September and
December of each calendar year commencing with September 30, 1992, upon
conversion thereof to a Eurodollar Advance and at maturity (whether by
acceleration or otherwise) and thereafter on demand. Interest on Additional
Indebtedness shall be payable upon demand.
(c) DEFAULT INTEREST. Notwithstanding anything to the contrary
contained herein, while any Event of Default is continuing, interest on the Base
Rate Advances, Eurodollar Advances, Additional Indebtedness and interest thereon
(to the extent that such interest is in default) shall be payable at a rate per
annum equal to two percentage points (2%) in excess of
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the rate then otherwise applicable hereunder thereto (or in the case of interest
in default, otherwise applicable to the principal in respect of which such
interest accrued).
(d) EURODOLLAR RATE DETERMINATION. The Agent, upon determining the
Eurodollar Rate and the Adjusted Eurodollar Rate for any Interest Period, shall
promptly notify by telephone (confirmed promptly in writing) or in writing the
Borrower and the Lenders of such rates. Such determination shall, in the
absence of manifest error, be conclusive and binding upon the Borrower and the
Lenders.
(e) CHANGES IN BASE RATE. After each change in the Base Rate, the
Agent shall promptly notify the Borrower and each Lender by telephone (confirmed
promptly in writing) or in writing of the date of such change and the new Base
Rate; provided, however, that the failure of the Agent to so notify the Borrower
or any Lender shall not affect the effectiveness of such change.
(f) STEP-DOWN PRICING ADJUSTMENTS. At any time prior to an Initial
Equity Issuance, if the Interest Coverage Ratio of the Borrower and its
Subsidiaries for any one Fiscal Year of the Borrower (as reflected on the
financial statements delivered pursuant to Section 9.1(b) hereof) equals or is
greater than (i) 4.75x, then beginning on the date of delivery of such financial
statements to the Agent and until the earlier to occur of (x) an Event of
Default, or (y) the date of delivery of financial statements under Section 9.1
hereof to the Agent which reflect an Interest Coverage Ratio, of less than
4.75x, the Base Rate otherwise payable with respect to the Loans as set forth in
this Section 2.9 shall be reduced by 0.125% from the rate of interest otherwise
payable hereunder and the percentage referred to in Section 2.9(a) hereof and
payable (as a margin over the Adjusted Eurodollar Rate) with respect to
Eurodollar Advances as set forth in this Section 2.9 shall be reduced by 0.25%;
or (ii) 5.25x, then beginning on the date of delivery of such financial
statements to the Agent and until the earlier to occur of (x) an Event of
Default, or (y) the date of delivery of financial statements under Section 9.1
hereof to the Agent which reflect an Interest Coverage Ratio, of less than
5.25x, the Base Rate otherwise payable with respect to the Loans as set forth in
this Section 2.9 shall be reduced by an additional 0.125% from the rate of
interest otherwise payable hereunder and the percentage referred to in Section
2.9(a) hereof and payable (as a margin over the Adjusted Eurodollar Rate) with
respect to Eurodollar Advances as set forth in this Section 2.9 shall be reduced
by an additional 0.25%.
(S) 2.10. Conversion of Borrowings; Renewals. (a) Unless otherwise
----------------------------------
prohibited under Section 2.13 or Section 2.14 hereof, the Borrower may, from
time to time following the New Closing Date and prior to the Maturity Date,
convert (i) all or a portion of outstanding Base Rate Advances to one or more
Eurodollar Advances in aggregate amounts of $1,500,000 or any integral multiple
of $500,000 in excess of $1,500,000, or (ii) all or a portion of outstanding
Eurodollar Advances made to the Borrower to one or more Base Rate Advances so
long as the aggregate principal balance of the portion of the Eurodollar
Advances made to the Borrower not being converted, if any, is $1,500,000 or an
integral multiple of $500,000 in excess of $1,500,000; provided, however, that
the Borrower shall not be entitled to convert any Base Rate Advance, or portion
thereof, to a Eurodollar Advance or any Eurodollar Advance, or portion thereof,
to a Base Rate Advance unless all accrued interest on the Base Rate Advance, or
portion thereof, or Eurodollar Advance or portion thereof, as the case may be,
to be converted through
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the date of such conversion shall have been paid in full, and provided, further,
that (except with respect to the Rollover Eurodollar Advances) for the initial
sixty days following the New Closing Date, the Borrower may select only one
month Interest Periods with respect to Eurodollar Advances. Each conversion by
the Borrower of any Advance or portion thereof (other than a conversion pursuant
to Section 2.13 or 2.14 hereof) shall be made not later than 3:00 p.m. (New York
time) on a Business Day on at least three Business Days' prior Written Notice or
telephonic notice from an Authorized Representative confirmed promptly in
writing to the Agent (which shall promptly notify each Lender thereof in writing
or by telephone confirmed promptly in writing) from the Borrower. Each such
notice (which notice shall be irrevocable) shall specify (i) the date of the
conversion and the amount to be converted, (ii) the particular Advance, or
portion thereof, to be converted, and (iii) in the case of conversion of any
Advance, or portion thereof, to a Eurodollar Advance, the duration of the
Interest Period for such Eurodollar Advance. Notwithstanding the above, the
Borrower shall not be entitled to convert any Advance, or portion thereof, to a
Eurodollar Advance if a Default or Event of Default shall have occurred and be
continuing. Except as provided in Section 2.13, any conversion of a Eurodollar
Advance, or portion thereof, to a Base Rate Advance shall be made only on the
last day of the Interest Period with respect to such Eurodollar Advance.
(b) Each renewal by the Borrower of an outstanding Eurodollar Advance
or portion thereof (in an amount of $1,500,000 or an integral multiple of
$500,000 in excess of $1,500,000) shall be made on notice to the Agent (which
shall promptly notify each Lender thereof in writing or by telephone confirmed
promptly in writing) given not later than 3:00 p.m. (New York time) on the third
Business Day prior to the last day of the Interest Period just ending for such
Eurodollar Advance. Each notice (which notice shall be irrevocable) by the
Borrower of the renewal of a Eurodollar Advance or portion thereof, shall be in
writing or by telephone from an Authorized Representative confirmed promptly in
writing and shall specify (i) the amount of such renewal of the Eurodollar
Advance or portion thereof and (ii) the duration of the Interest Period for such
renewal; provided, however, that if the Borrower fails to select the duration of
any Interest Period for the renewal of such Eurodollar Advance or portion
thereof (in an amount of $1,500,000 or an integral multiple of $500,000 in
excess of $1,500,000), the duration of such Interest Period shall be one month.
Notwithstanding the above, the Borrower shall not be entitled to renew a
Eurodollar Advance or a portion thereof, (i) if at the time of the selection of
such renewal there shall exist a Default or an Event of Default, or (ii) to the
extent such renewal would be prohibited by Section 2.13 or 2.14 hereof.
(c) Any Eurodollar Advance or portion thereof as to which the Agent
shall not have received a proper notice of conversion or renewal as provided in
Section 2.10(a) or 2.10(b) hereof or notice of payment or prepayment by 3:00
p.m. (New York time) at least three Business Days prior to the last day of the
Interest Period just ending for such Eurodollar Advance shall (whether or not
any Default or Event of Default has occurred) automatically be converted to a
Base Rate Advance on the last day of the Interest Period for such Eurodollar
Advance.
(S) 2.11. Computation of Interest. Interest on the Loans and
-----------------------
Additional Indebtedness calculated on the basis of a rate per annum and fees
calculated on a per annum basis, shall be computed on the basis of actual days
elapsed over a (x) 360-day year for Eurodollar Advances and such fees, and (y)
365-day year for Base Rate Advances and any other
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<PAGE>
amounts. Any rate of interest on the Loans and Additional Indebtedness which is
computed on the basis of the Base Rate shall change when and as the Base Rate
changes.
(S) 2.12. Increased Costs. In the case of the pro rata share of any
---------------
Lender in any Eurodollar Advance, in the event any Change of Law shall occur,
which: (i) subjects such Lender or any branch or Affiliate of such Lender to any
tax, duty or other charge with respect to such share of such Eurodollar Advance
(other than Excluded Taxes); or (ii) changes the basis or rate of taxation of
payments to any Lender or any branch or Affiliate of such Lender of principal of
and/or interest on such share of such Eurodollar Advance and/or other fees and
amounts payable hereunder with respect thereto (other than Excluded Taxes); or
(iii) imposes, modifies or deems applicable any reserve, deposit or similar
requirement against any assets held by, deposits with or for the account of, or
loans or commitments by, an office of any Lender or any branch or Affiliate of
such Lender; or (iv) imposes upon such Lender or any branch or Affiliate of such
Lender any other condition with respect to such share of such Eurodollar Advance
or this Agreement; and the result of any of the foregoing is (x) to increase the
actual cost of making, funding or maintaining such share of such Eurodollar
Advance hereunder by an amount such Lender reasonably deems to be material to
such Lender or any branch or Affiliate of such Lender, or (y) to reduce the
amount of any payment (whether of principal, interest, or otherwise) received or
receivable by such Lender or any branch or Affiliate of such Lender, or to
require such Lender or any branch or Affiliate of such Lender to make any
payment, in each case by or in an amount which such Lender in its reasonable
judgment deems material, then and in any such case: (1) such Lender shall
promptly notify the Borrower, the Agent and the other Lenders in writing of the
happening of such event; (2) such Lender shall promptly deliver to the Borrower,
the Agent and the other Lenders a certificate stating the change which has
occurred, or the reserve requirements or other conditions which have been
imposed on such Lender or branch or Affiliate of such Lender, or the request,
directive or requirement with which it has complied, together with the date
thereof, the amount of such increased cost, reduction or payment and the way in
which such amount has been calculated; and (3) the Borrower shall pay such
Lender on demand such an amount or amounts as will compensate such Lender or its
branch or Affiliate for such additional cost, reduction or payment. The
certificate of such Lender as to the additional amounts payable pursuant to this
Section 2.12 delivered to the Borrower shall in the absence of manifest error be
conclusive of the amount thereof. Each Lender agrees to use reasonable efforts
to avoid or minimize the payment by the Borrower of any additional amounts under
this Section 2.12, including, without limitation, by the designation of another
branch or Affiliate of such Lender from which such Lender could make such
Lender's pro rata share of Eurodollar Advances so long as such designation is
not disadvantageous to such Lender as reasonably determined by such Lender. The
protection of this Section 2.12 shall be available to such Lender regardless of
any possible contention of invalidity or inapplicability of the law, regulation,
treaty, order, directive, interpretation or condition which has been imposed.
(S) 2.13. Change of Law Rendering Eurodollar Advances Unlawful. (a)
----------------------------------------------------
Notwithstanding anything to the contrary herein contained, in the event that any
Change of Law makes it unlawful for any Lender to fund any portion of a
Eurodollar Advance or to give effect to its obligations as contemplated hereby
with respect to Eurodollar Advances, such Lender shall, upon the happening of
such event, notify the Agent, the other Lenders and the Borrower thereof in
writing stating the reason therefor, and the obligation of such Lender to allow
conversion to or selection or renewal with respect to its pro rata share of any
Eurodollar Advance by the
39
<PAGE>
Borrower shall, upon the happening of such event, forthwith be suspended for the
duration of such illegality and during such illegality such Lender shall fund
its share of all Advances as Base Rate Advances and there shall be no renewal
of, or conversion to, any share of such Lender in any Eurodollar Advance. If and
when such illegality ceases to exist, such suspension shall cease and such
affected Lender shall similarly notify the Agent, the other Lenders and the
Borrower.
(b) Notwithstanding anything to the contrary contained herein, in the
event that any Change of Law shall make it commercially impracticable or
unlawful for any Lender to continue in effect the funding of any portion of a
Eurodollar Advance previously made by it hereunder and then outstanding, such
Lender shall, upon the happening of such event, notify the Agent, the other
Lenders and the Borrower thereof in writing stating the reasons therefor, and
such Lender's pro rata share of such Eurodollar Advance shall automatically be
converted to a Base Rate Advance. The Borrower shall pay to the Agent for the
benefit of such Lender accrued interest owing on such converted portion of such
Eurodollar Advance made to the Borrower through the date of such conversion,
together with any amounts payable under Section 2.15 hereof with respect to such
prepayment. After such notice shall have been given and until the circumstances
giving rise to such notice no longer exist, each request for such Lender's pro
rata share of a Eurodollar Advance or for conversion to or renewal of such
Lender's pro rata share of a Eurodollar Advance shall be deemed a request by the
Borrower for a Base Rate Advance. If and when such impracticability or
illegality ceases to exist, such suspension shall cease and such affected Lender
shall similarly notify the Agent, the other Lenders and the Borrower.
(S) 2.14. Eurodollar Availability. (a) In the event, and on each
-----------------------
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Advance, the Agent shall have determined in
good faith (which determination shall, in the absence of manifest error, be
conclusive and binding upon the Borrower) that dollar deposits in the amount of
the principal amount of such Eurodollar Advance are not generally available in
the London (England, U.K.) interbank market, or that the rate at which such
dollar deposits are being offered will not accurately reflect the cost to one or
more Lenders of making or funding the principal amount of their portions of such
Eurodollar Advance during such Interest Period, or that reasonable means do not
exist for ascertaining the Eurodollar Rate, the Agent shall, as soon as
practicable thereafter, give written or telephonic notice of such determination
to the Lenders and the Borrower and any request by the Borrower for a Eurodollar
Advance pursuant to Section 2.7 hereof or for conversion to or renewal of a
Eurodollar Advance pursuant to Section 2.10 hereof shall thereupon, and until
the circumstances giving rise to such notice no longer exist (as notified by the
Agent to the Borrower and the Lenders), be deemed a request by the Borrower for
the making of or conversion to a Base Rate Advance.
(b) If, at any time, the Agent shall have determined in good faith
(which determination shall, in the absence of manifest error, be conclusive and
binding upon the Borrower) that any contingency has occurred which adversely
affects the London (England, U.K.) interbank market or that any Change of Law or
other circumstances affecting one or more Lenders, in the London (England, U.K.)
interbank market makes the funding of any portion of a Eurodollar Advance
impracticable, the Agent shall, as soon as practicable thereafter, give written
or telephonic notice of such determination to the Lenders and the Borrower and
any request by the Borrower for a Eurodollar Advance pursuant to Section 2.7
hereof or for conversion to or renewal of a Eurodollar Advance pursuant to
Section 2.10 hereof shall
40
<PAGE>
thereupon, and until the circumstances giving rise to such notice no longer
exist (as notified by the Agent to the Borrower and the Lenders), be deemed a
request by the Borrower for the making of or conversion to a Base Rate Advance.
(S) 2.15. Indemnities. (a) The Borrower hereby agrees to indemnify
-----------
each Lender on demand against any loss or expense which such Lender or its
branch or Affiliate may sustain or incur as a consequence of: (i) any default in
payment or prepayment of the principal amount of any Eurodollar Advance made to
it or any portion thereof or interest accrued thereon, as and when due and
payable (at the due date thereof, by irrevocable notice of payment or
prepayment, or otherwise); (ii) the effect of the occurrence of any Event of
Default upon any Eurodollar Advance made to it; (iii) the payment or prepayment
of the principal amount of any Eurodollar Advance made to it or any portion
thereof, pursuant to Section 2 or 3 hereof, or otherwise, on any day other than
the last day of an Interest Period or the payment of any interest on any
Eurodollar Advance made to it, or portion thereof, on a day other than an
Interest Payment Date for such Eurodollar Advance; or (iv) the failure by the
Borrower to accept or make a borrowing of a Eurodollar Advance or a conversion
to or renewal of a Eurodollar Advance after it has requested such borrowing,
conversion or renewal; in each case including, but not limited to, any loss or
expense sustained or incurred in liquidating or employing deposits from third
parties acquired to effect or maintain such Eurodollar Advance or any portion
thereof. Each Lender shall promptly provide to the Borrower, the Agent and the
other Lenders a statement, supported where applicable by documentary evidence,
explaining the amount of any such loss or expense it incurs, which statement
shall be conclusive absent manifest error.
(b) If any Change of Law, shall: (i) impose upon, modify, require,
make or deem applicable to any one or more Lenders, or any of their Affiliates
or branches, any reserve requirement, special deposit requirement, insurance
assessment or similar requirement against or affecting the Commitment of such
Lender or Lenders or such Affiliates or branches; or (ii) impose any condition
upon or cause in any manner the addition of, any supplement to or any increase
of any kind to the capital or cost base of such Lender or Lenders, or such
Affiliates or branches thereof, for extending or maintaining the Commitment of
such Lender, which results in an increase in the capital requirement supporting
such Commitment, or (iii) impose upon, modify, require, make or deem applicable
to such Lender or Lenders or any such Affiliates or branches any capital
requirement, increased capital requirement or similar requirement, and the
result of any events referred to in clause (i), (ii) or (iii) above shall be to
(A) increase the amount of capital required or expected to be required to be
maintained by such Lender or any such Affiliate or branch and such Lender
determines in good faith that the amount of such capital requirement is incurred
by or based on such Commitment or other commitments of this type or (B) increase
the costs or decrease the benefit in any way to such Lender or Lenders, or any
such Affiliate or branch, of extending or maintaining such Commitment or
extending or maintaining such Lender's or Lenders' portion of the Loans or
holding any Collateral; then and in such event the Borrower shall, on or prior
to the tenth (10th) Business Day after the giving of Written Notice of such
increased costs and/or decreased benefits to the Borrower and the Agent by such
Lender or Lenders (or any such Affiliate or branch) (such Written Notice to be
given promptly), pay to such Lender or Lenders all such additional amounts which
in the sole good faith calculation of such Lender or Lenders are properly
allocable to the Commitment of such Lender, such Lender's or Lenders' portion of
the Loans and/or the Collateral, as the case may be, and which: (1) in the case
of events referred to in clause (i) above, shall be sufficient to compensate it
for all such
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<PAGE>
increased costs and/or decreased benefits; and/or (2) in the case of events
referred to in clauses (ii) and (iii) above, shall be an amount equal to the
reduction, as reasonably determined by such Lender, in the after-tax rate of
return on such Lender's capital resulting from any such capital or increased
capital or similar requirement (including, without limitation, any such Lender's
or Lender's Affiliates' or branches' cost of taking action in anticipation of
the effectiveness of any event described in clause (ii) or (iii) in order to
enable such Lender, Lenders, Affiliate or branch to be in compliance therewith
upon such effectiveness), all as certified by such Lender or Lenders in said
Written Notice to the Borrower promptly after the occurrence of the applicable
event. Such certification shall be conclusive and binding on the Borrower absent
manifest error.
(c) The Borrower hereby agrees to indemnify and hold harmless the
Agent and each Lender and their respective Affiliates, directors, officers,
agents, representatives, counsel and employees and each other Person, if any,
controlling them or any of their Affiliates within the meaning of either Section
15 of the Securities Act of 1933, as amended, or Section 20(a) of the Securities
Exchange Act of 1934 (each an "INDEMNIFIED PARTY"), from and against any and all
losses, claims, damages, costs, reasonable expenses (including reasonable
counsel fees and disbursements) and liabilities which may be incurred by or
asserted against such Indemnified Party with respect to or arising out of the
commitments hereunder to make the Term Loan or the Revolving Advances or to
issue Letters of Credit, or the financings contemplated hereby, the other Loan
Documents, the Collateral (including, without limitation, the use thereof by any
of such Persons or any other Person, the exercise by the Agent or any Lender of
rights and remedies or any power of attorney with respect thereto, and any
action or inaction of the Agent or any Lender under and in accordance with any
Security Document), the use of proceeds of any financial accommodations provided
hereunder, the Acquisition, the Comcast Acquisition, any investigation,
litigation or other proceeding brought or threatened relating to the Acquisition
or the Comcast Acquisition, any failure of any party to the Purchase Agreement
or the Comcast Purchase Agreement to comply with any applicable bulk sales laws
or the role of any such Person or Persons in connection with the foregoing
whether or not they or any other Indemnified Party is named as a party to any
legal action or proceeding ("CLAIMS"). The Borrower will not, however, be
responsible to any Indemnified Party hereunder for any Claims to the extent that
a court having jurisdiction shall have determined by a final judgment that any
such Claim shall have arisen out of or resulted from actions taken or omitted to
be taken by any Indemnified Party (a) (i) by reason of the bad faith, willful
misconduct or gross negligence of any Indemnified Party, (ii) in violation of
any law or regulation applicable to any Indemnified Party (except to the extent
that such violation is attributable to any breach of any representation,
warranty or agreement by or on behalf of the Company, the Transferors, the
Borrower, CCI, MLP, Centre Partners or any of its respective Subsidiaries, in
each case, as determined by a final nonappealable decision of a court of
competent jurisdiction), or (iii) arising from any Indemnified Party's ownership
of equity in the Borrower, or (b) arising from disputes among Lenders ("EXCLUDED
CLAIMS"). Further, should any of the Agent's or any of the Lender's employees be
involved in any legal action or proceeding in connection with the transactions
contemplated hereby (other than relating to an Excluded Claim), the Borrower
hereby agrees to pay to the Agent and each Lender such per diem compensation as
the Agent or such Lender shall reasonably request for each employee for each day
or portion thereof that such employee is involved in preparation and testimony
pertaining to any such legal action or proceeding. The Indemnified Party shall
give the Borrower prompt Written Notice of any Claim setting forth a description
of those elements of the Claim of which such Indemnified Party has knowledge.
The
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Borrower shall have the right at any time during which a Claim is pending to
select counsel to defend and settle any Claims so long as in any such event the
Borrower shall have stated in a writing delivered to the applicable Indemnified
Party that, as between the Borrower and such Indemnified Party, the Borrower is
responsible to such Indemnified Party with respect to such Claim; provided,
however, that the Borrower shall not be entitled to control the defense of any
Claim in the event that there are defenses available to the Indemnified Party
which are not available to the Borrower. In any other case, the Indemnified
Party shall have the right to select counsel and control the defense of any
Claims; provided, however, that no Indemnified Party shall settle any Claim as
to which it is controlling the defense without the prior written consent of the
Borrower, which consent shall not be unreasonably withheld or delayed. With
respect to any Claim for which the Borrower is entitled to select counsel, each
Indemnified Party shall have the right, at its expense, to participate in the
defense of such Claim. In the event that, with respect to any Claim, more than
one Indemnified Party shall be permitted hereunder to select counsel to defend
such Claim at the expense of the Borrower and shall decide to do so, then all
such Indemnified Parties shall select the same counsel to defend such
Indemnified Parties with respect to such Claim; provided, however, that if any
such Indemnified Party shall in its reasonable opinion consider that the
retention of one joint counsel as aforesaid shall result in a conflict of
interest, such Indemnified Party may, at the expense of the Borrower, select its
own counsel to defend such Indemnified Party with respect to such Claim. The
Indemnified Parties and the Borrower and their respective counsel shall
cooperate with each other in all reasonable respects in any investigation, trial
and defense of any such Claim and any appeal arising therefrom.
(d) If for any reason the foregoing indemnity is unavailable to any
Indemnified Party or insufficient to hold it free and harmless as contemplated
by the preceding paragraph (c), then the Borrower shall contribute to the amount
paid or payable by the Indemnified Party as a result of any Claim in such
proportion as is appropriate to reflect, not only the relative benefits received
by the Borrower on the one hand and such Indemnified Party on the other hand,
but also the relative fault of the Borrower and such Indemnified Party, as well
as any other relevant equitable considerations.
(S) 2.16. Disbursement. The proceeds of the Term Loan and each
------------
Revolving Advance shall be disbursed by the Agent from the Payment Office, shall
be charged, together with interest, fees and other amounts payable by the
Borrower hereunder, to the account of the Borrower on the books of the Agent
from time to time, and shall be payable at such office.
(S) 2.17. Agent's Availability Assumption. (a) Unless the Agent
-------------------------------
shall have been notified by any Lender by Written Notice prior to a borrowing
date that such Lender does not intend to make available to the Agent such
Lender's pro rata portion of the Term Loan or any Revolving Advance which it
shall be obligated to make on such date, the Agent may assume that such Lender
has made such amount available to the Agent on the date for such borrowing and
the Agent may, in reliance upon such assumption, make available to the Borrower
a corresponding amount. If such corresponding amount is not in fact made
available to the Agent by such Lender on such date of borrowing, the Agent shall
be entitled to recover such corresponding amount on demand from such Lender,
which demand shall be made in a reasonably prompt manner. If such Lender does
not pay such corresponding amount forthwith
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upon the Agent's demand therefor, the Agent shall promptly notify the other
Lenders and the Borrower, and the Borrower shall pay such corresponding amount
to the Agent.
(b) The Agent shall also be entitled to recover from such Lender or
the Borrower interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by the Agent to the
Borrower to the date such corresponding amount is recovered by the Agent, at a
rate per annum equal to (x) if paid by such Lender, the cost to the Agent of
funding such amount as notified in writing by the Agent to such Lender; or (y)
if paid by the Borrower (without duplication to amounts paid under Section 2.9
hereof), the applicable rate for Base Rate Advances or Eurodollar Advances, as
the case may be.
(c) In the event that any Lender shall fail to fund its pro rata
share of any Revolving Advance made pursuant to Section 4.1(c) hereof or to
purchase its letter of credit participation under Section 13.17 hereof, the
Agent on behalf of UBS or the relevant Issuing Lender, as the case may be, shall
be entitled to recover such amount on demand from such Lender. If such Lender
does not pay such amount forthwith upon the Agent's demand therefor, the Agent
shall promptly notify the Borrower and the other Lenders thereof and the
Borrower shall pay such amount to the Agent. The Agent on behalf of UBS or such
Issuing Lender, as the case may be, shall also be entitled to recover from such
Lender or the Borrower, as the case may be, interest on such amount in respect
of each day from the date such Revolving Advance was made or the date such
purchase was to have been made, as the case may be, to the date such amount is
recovered by the Agent, at a rate per annum equal to (x) if paid by such Lender,
the cost to UBS or the relevant Issuing Lender, as the case may be, of the
payment of the drawing under the Letter of Credit for which such Revolving
Advance was (or was to have been) made in the case of a Revolving Advance made
pursuant to Section 4.1(c) hereof or a participation under Section 13.17 hereof,
as the case may be, or (y) if paid by the Borrower (without duplication to
amounts paid under Section 2.9 hereof), the applicable rate for Base Rate
Advances.
(d) Nothing herein shall be deemed to relieve any Lender from its
obligation to fund its pro rata share of the Term Loan or any Revolving Advance
or to purchase any participation as required hereunder, or to prejudice any
rights which the Borrower may have against any Lender as a result of any default
by such Lender hereunder. No Lender shall be responsible for any default of any
other Lender in respect of any other Lender's obligation to make its pro rata
share of the Term Loan or any Revolving Advances hereunder nor shall the
Revolving Commitment or Term Loan Commitment of any Lender hereunder be
increased as a result of such default of any other Lender. Each Lender shall be
obligated to the extent provided herein regardless of the failure of any other
Lender to fulfill its obligations hereunder.
(S) 2.18. Pro Rata Treatment and Payments. Except as contemplated by
-------------------------------
this Agreement, including, without limitation, Sections 2.8, 2.12, 2.13, 2.15,
3.5, 3.6, 4, 6.21, 13.1, and 13.5 hereof, each borrowing by the Borrower from
the Lenders and each payment (including each prepayment) on account of the
principal of and interest on the Loans and fees described in this Agreement
shall be made to the Agent for the pro rata benefit of each Lender according to
the respective percentages of each Lender set forth opposite its name on
Schedule 2.2 hereto. The Agent will distribute each payment to the Lenders
promptly following receipt thereof (and
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in any event on the same Business Day as the date when received, if such payment
is received at or prior to 12:00 noon (New York time)).
(S) 2.19. Eurodollar Offices. Each Lender intends to initially
------------------
fulfill its commitment with respect to such Lender's pro rata share of any
Eurodollar Advance by causing the Initial Eurodollar Office of such Lender to
make such Lender's pro rata share of such Eurodollar Advance; provided, however,
that each Lender may, at its option fulfill such commitment by causing another
branch or an Affiliate of such Lender to make such Lender's pro rata share of
such Eurodollar Advance; and provided, further, that the selection by such
Lender of the Initial Eurodollar Office of such Lender or any other such branch
or Affiliate shall not affect the obligations of the Borrower to repay such
Lender's pro rata share of the Eurodollar Advances in accordance with the terms
of this Agreement.
(S) 2.20. Telephonic Notice. Without in any way limiting the
-----------------
Borrower's obligation to confirm in writing any telephonic notice of a
borrowing, conversion or renewal, the Agent may act without liability upon the
basis of telephonic notice believed by the Agent in good faith to be from an
Authorized Representative of the Borrower prior to receipt of written
confirmation.
(S) 2.21. Maximum Interest. (a) No provision of this Agreement or
----------------
any Note shall require the payment to any Lender or permit the collection by any
Lender of interest in excess of the maximum rate of interest from time to time
permitted (after taking into account all consideration which constitutes
interest) by laws applicable to the Lender Debt which are binding on any Lender
(such maximum rate being such Lender's "MAXIMUM PERMISSIBLE RATE").
(b) If the amount of interest computed without giving effect to this
Section 2.21 and payable on any interest payment date in respect of the
preceding interest computation period would exceed the amount of interest
computed in respect of such period at the Maximum Permissible Rate, the amount
of interest payable to such Lender on such date in respect of such period shall
be computed at such Lender's Maximum Permissible Rate.
(c) If at any time and from time to time: (i) the amount of interest
payable to any Lender on any interest payment date shall be computed at such
Lender's Maximum Permissible Rate pursuant to the preceding subsection (b); and
(ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at such Lender's Maximum Permissible
Rate, then the amount of interest payable to such Lender in respect of such
subsequent interest computation period shall continue to be computed at such
Lender's Maximum Permissible Rate until the amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to the preceding subsection (b).
SECTION 3. PAYMENTS, PREPAYMENTS AND REDUCTIONS
(S) 3.1. Mandatory Payments. (a) SCHEDULED PAYMENTS. The Borrower
------------------
shall, until payment in full of the Term Loan and subject to earlier prepayment
and payment as hereinafter provided, pay to the Agent for the benefit of the
Lenders the principal sum of the
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<PAGE>
Term Loan, in 14 consecutive semi-annual installments on the dates and in the
amounts set forth below:
<TABLE>
<CAPTION>
Payment Date Installment Amount
------------ ------------------
<S> <C>
July 15, 1994 1,500,000
January 15, 1995 1,500,000
July 15, 1995 2,500,000
January 15, 1996 2,500,000
July 15, 1996 3,000,000
January 15, 1997 3,000,000
July 15, 1997 4,000,000
January 15, 1998 4,000,000
July 15, 1998 4,000,000
January 15, 1999 4,000,000
July 15, 1999 4,000,000
January 15, 2000 4,000,000
July 15, 2000 4,300,000
Maturity Date 4,300,000
</TABLE>
provided, however, that in any event the last such installment shall be in the
amount necessary to repay in full the unpaid principal amount of the Term Loan.
(b) EXCESS CASH FLOW. Until such time as there shall be outstanding
no Loans and no Commitments, and the Letter of Credit Usage shall be zero, not
later than the date 90 days following the end of each Fiscal Year of the
Borrower, commencing with the Fiscal Year ending on December 31, 1992, the
Borrower shall pay and there shall become due and payable in respect of such
Fiscal Year, a prepayment (without premium or penalty) in respect of the Lender
Debt equal to 67% of the Excess Cash Flow for such Fiscal Year, such prepayment
to be applied as follows: FIRST, to the Term Loan (applied pro rata to the then
remaining installments of principal thereof, until the Term Loan has been paid
in full), SECOND, to the outstanding principal of the Revolving Advances (in
permanent reduction of the Revolving Credit Facility Commitment) until the
Revolving Advances have been paid in full, and THIRD, to provide cash collateral
for any outstanding Letters of Credit, until there shall have been provided cash
collateral equal to the undrawn amount of all Letters of Credit (any such cash
collateral for outstanding obligations in respect of Letters of Credit, whether
provided under this clause THIRD or otherwise under the Loan Documents but in
any event to be held by the Agent on terms and pursuant to agreements reasonably
satisfactory to the Agent and which cash collateral shall constitute part of the
Collateral (the "LETTER OF CREDIT CASH COLLATERAL")). Notwithstanding the
foregoing, the Excess Cash Flow generated from and after the Closing Date on a
cumulative basis until such time as such cumulative Excess Cash Flow from and
after the Closing Date first equals or exceeds $1,200,000 shall be excluded from
the calculation made above to determine the amount of prepayment under this
Section 3.1(b).
(c) ASSET SALES. Until such time as there shall be outstanding no
Loans and no Commitments, and the Letter of Credit Usage shall be zero, the
Borrower shall pay and there shall become due and payable, concurrently with the
receipt of Net Proceeds with respect to any
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Asset Sale, a prepayment (without premium or penalty) in respect of the Lender
Debt equal to the Net Proceeds of such Asset Sale, such prepayment to be applied
as follows: FIRST, to the Term Loan (applied pro rata to the then remaining
installments of principal thereof, until the Term Loan has been paid in full),
SECOND, to the outstanding principal of the Revolving Advances (in permanent
reduction of the Revolving Credit Facility Commitment) until the Revolving
Advances have been paid in full, and THIRD, to provide Letter of Credit Cash
Collateral for any outstanding Letters of Credit, until there shall have been
provided Letter of Credit Cash Collateral equal to the undrawn amount of all
Letters of Credit.
(d) ISSUANCES AND EXTRAORDINARY RECEIPTS. Until such time as there
shall be outstanding no Loans and no Commitments, and the Letter of Credit Usage
shall be zero, the Borrower shall pay and there shall become due and payable,
concurrently with the receipt of Net Proceeds with respect to any Issuance
(other than the Guaranteed Loan, the Converted Loan, the Converted Equity, a
Takeout Financing, a Special Subordinated Takeout Financing or an Initial Equity
Issuance) or Extraordinary Receipt, a prepayment (without premium or penalty) in
respect of the Lender Debt equal to the Net Proceeds of such Issuance or
Extraordinary Receipt, such prepayment to be applied as follows: FIRST, to the
Term Loan (applied to installments of principal thereof in inverse order of
maturities) until the Term Loan has been paid in full, SECOND, to the
outstanding principal of the Revolving Advances (in permanent reduction of the
Revolving Credit Facility Commitment) until the Revolving Advances have been
paid in full, and THIRD, to provide Letter of Credit Cash Collateral for any
outstanding Letters of Credit, until there shall have been provided Letter of
Credit Cash Collateral equal to the undrawn amount of all Letters of Credit.
(e) TAKEOUT FINANCING. Until such time as there shall be outstanding
no Loans and no Commitments, and the Letter of Credit Usage shall be zero, the
Borrower shall pay and there shall become due and payable, concurrently with the
receipt of Net Proceeds with respect to a Takeout Financing, a prepayment
(without premium or penalty) in respect of the Lender Debt and other
Indebtedness equal to the Net Proceeds of such Issuance, such prepayment to be
applied as follows: FIRST, to the Term Loan until the Term Loan (and any other
amounts outstanding thereunder, including accrued and unpaid interest, fees and
expenses) has been paid in full, SECOND, to the Guaranteed Loan until the
Guaranteed Loan (and any other amounts outstanding thereunder, including accrued
and unpaid interest, fees and expenses) has paid in full, and THIRD, to the
payment of all Indebtedness under the Subordinated Notes until the Indebtedness
under the Subordinated Notes (and any other amounts outstanding thereunder,
including accrued and unpaid interest, fees and expenses) is paid in full.
(f) INITIAL EQUITY ISSUANCE. Until such time as there shall be
outstanding no Loans and no Commitments, and the Letter of Credit Usage shall be
zero, the Borrower shall pay and there shall become due and payable,
concurrently with the receipt of Net Proceeds with respect to an Initial Equity
Issuance, a prepayment (without premium or penalty) in respect of the Lender
Debt and other Indebtedness equal to the Net Proceeds of such Initial Equity
Issuance, such prepayment to be applied as follows: FIRST, to the Guaranteed
Loan until all 'Guaranteed Loan Obligations' (as such term is defined in the
Guaranteed Note) have been paid in full, SECOND, to the payment of all
Indebtedness under the Subordinated Notes until the Indebtedness under the
Subordinated Notes (and any other amounts outstanding thereunder, including
accrued and unpaid interest, fees and expenses) is paid in full, THIRD, to the
Term Loan (applied pro rata to the then remaining installments of principal
thereof), until the Term
47
<PAGE>
Loan has been paid in full, FOURTH, to the outstanding principal of the
Revolving Advances (in permanent reduction of the Revolving Credit Facility
Commitment) until the Revolving Advances have been paid in full, and FIFTH, to
provide Letter of Credit Cash Collateral for any outstanding Letters of Credit,
until there shall have been provided Letter of Credit Cash Collateral equal to
the undrawn amount of all Letters of Credit.
(g) SPECIAL SUBORDINATED TAKEOUT FINANCING. Until such time as there
shall be outstanding no Loans and no Commitments, and the Letter of Credit Usage
shall be zero, the Borrower shall pay and there shall become due and payable,
concurrently with the receipt of Net Proceeds with respect to any Special
Subordinated Takeout Financing, a prepayment (without premium or penalty) in
respect of the Lender Debt and other Indebtedness equal to the Net Proceeds of
such Issuance or Extraordinary Receipt, such prepayment to be applied as
follows: FIRST, to the Guaranteed Loan until all 'Guaranteed Loan Obligations'
(as such term is defined in the Guaranteed Note) have been paid in full, SECOND,
to the Term Loan (applied to installments of principal thereof in inverse order
of maturities) until the Term Loan has been paid in full, THIRD, to the
outstanding principal of the Revolving Advances (in permanent reduction of the
Revolving Credit Facility Commitment) until the Revolving Advances have been
paid in full, and FOURTH, to provide Letter of Credit Cash Collateral for any
outstanding Letters of Credit, until there shall have been provided Letter of
Credit Cash Collateral equal to the undrawn amount of all Letters of Credit.
(h) REVOLVING ADVANCES IN EXCESS OF THE BORROWING LIMIT. If at any
time the sum of the then aggregate outstanding principal amount of the Revolving
Loan plus the Letter of Credit Usage at such time shall exceed the Borrowing
Limit at such time, the Borrower shall immediately eliminate such excess by
first paying an amount equal to such excess until the sooner to occur of (x) the
elimination in full of such excess, and (y) the Revolving Loan is paid in full,
and, to the extent then necessary to eliminate any remaining excess after
payment in full of the Revolving Loan, by providing Letter of Credit Cash
Collateral in an amount equal to the remaining excess for any outstanding
Letters of Credit, until there shall have been provided Letter of Credit Cash
Collateral equal to the undrawn amount of all Letters of Credit.
(i) ADJUSTMENT IN PURCHASE PRICE UNDER THE PURCHASE AGREEMENT. The
Borrower shall pay to the Agent for the benefit of the Lenders an amount equal
to 50% of all aggregate amounts remitted pursuant to Section 2.3 of the Purchase
Agreement in excess of $1,400,000, which amounts shall applied pro rata to the
then remaining installments of principal of the Term Loan.
(j) ADJUSTMENT IN PURCHASE PRICE UNDER THE COMCAST PURCHASE
AGREEMENT. The Borrower shall pay to the Agent for the benefit of the Lenders
an amount equal to 50% of all aggregate amounts remitted by the Transferors
pursuant to Section 2.3 of the Comcast Purchase Agreement, which amounts shall
applied pro rata to the then remaining installments of principal of the Term
Loan.
(k) CLEAN DOWN. The Borrower shall cause, for a period of at least
30 consecutive days once every Fiscal Year, the aggregate outstanding principal
balance of the Revolving Loans to be reduced to an amount equal to or less than
(i) $6,000,000 for the Fiscal Year ending December 31, 1994, (ii) $3,500,000 for
the Fiscal Year ending December 31, 1995,
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<PAGE>
(iii) $2,500,000 for the Fiscal Year ending December 31, 1996, and (iv) $0 for
each Fiscal Year thereafter.
(l) PAYMENTS TO INCLUDE INTEREST. All prepayments under Sections 3.1
and 3.2 hereof shall be made together with accrued interest to the date of such
prepayment on the principal amount prepaid but without the prepayment premium
set forth in Section 3.7 hereof, provided, that, all such payments shall be
subject to payment of any applicable indemnity obligations pursuant to Section
2.15 hereof.
(S) 3.2. Payment From Insurance Proceeds. (a) Except as provided in
-------------------------------
paragraph (b) below, not later than the fifteenth (15th) calendar day following
the receipt by the Agent or any Credit Party or Subsidiary of any Credit Party
(x) of any Net Proceeds of any insurance required to be maintained pursuant to
Section 9.3(a) hereof on account of each separate loss, damage or injury in
excess of $50,000 (or, if there shall be continuing an Event of Default, of any
amount of Net Proceeds) to any asset (other than Inventory) of such Credit Party
or such Subsidiary (including, without limitation, all Collateral other than
Inventory), or (y) of any Net Proceeds of any business interruption insurance
required to be maintained pursuant to Section 9.3(a) hereof in excess of
$250,000 (or, if there shall be continuing an Event of Default, the full amount
of Net Proceeds), such Credit Party or Subsidiary shall notify the Agent of such
receipt in writing or by telephone promptly confirmed in writing, and not later
than the fifteenth (15th) calendar day following receipt by the Agent or such
Credit Party or Subsidiary of any such amounts of proceeds of such insurance,
there shall become due and payable a prepayment of principal in an amount equal
to such Net Proceeds. Prepayments from such Net Proceeds shall be applied as
follows: FIRST, to the Term Loan (applied pro rata to the then remaining
installments of principal thereof), until the Term Loan has been paid in full,
SECOND, to the outstanding principal of the Revolving Advances (in permanent
reduction of the Revolving Credit Facility Commitment) until the Revolving
Advances have been paid in full, THIRD, to provide Letter of Credit Cash
Collateral for any outstanding Letters of Credit, until there shall have been
provided Letter of Credit Cash Collateral equal to the undrawn amount of all
Letters of Credit, and FOURTH, to the Borrower or whoever else shall be legally
entitled thereto. Any such prepayment on the Term Loan or Revolving Loan shall
be made in accordance with the terms of Section 3.4(f) hereof, without penalty
or premium, but shall be subject to payment of any applicable indemnity
obligations pursuant to Section 2.15 hereof.
(b) In the case of the receipt of Net Proceeds described in paragraph
(a) of this Section 3.2 with respect to the loss, damage or injury to any asset
of a Credit Party or its Subsidiary (other than Net Proceeds of any business
interruption insurance), the Borrower may elect, by written notice delivered to
the Agent not later than the day on which a prepayment would otherwise be
required, to apply all or a portion of such Net Proceeds for the purpose of
replacing, repairing, restoring or rebuilding the relevant tangible property,
and, in such event, any required prepayment under paragraph (a) of this Section
3.2, shall be reduced dollar for dollar by the amount of such election. An
election under this paragraph 3.2(b) shall not be effective unless: (A) at the
time of such election there is no continuing no Default or Event of Default; (B)
the Borrower shall have certified to the Agent that: (1) the Net Proceeds of the
insurance adjustment for such loss, damage or injury, together with other funds
available to the Borrower, shall be sufficient to complete such replacement,
repair, restoration or rebuilding in accordance with all applicable laws,
regulations and ordinances; and (2) to the best knowledge of the
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<PAGE>
Borrower, no Default or Event of Default has arisen or will arise as a result of
such loss, damage, injury, replacement, repair or rebuilding; and (C) if the
amount of Net Proceeds in question exceeds $250,000, the Borrower shall have
obtained the Written Consent of the Majority Lenders (which consent will not be
unreasonably withheld) to such election.
(c) In the event of an election under Section 3.2(b), pending
application of the Net Proceeds to the required replacement, repairs,
restoration or rebuilding, the Borrower shall, not later than the time at which
prepayment would have been, in the absence of such election, required under the
first sentence of Section 3.2(b), apply such Net Proceeds to the prepayment of
the outstanding principal balance, if any, of the Revolving Advances (not in
permanent reduction of the Revolving Credit Facility Commitment), and deposit
(the "SPECIAL DEPOSIT") with the Agent, the balance, if any, of such Net
Proceeds remaining after such application, pursuant to agreements in form, scope
and substance reasonably satisfactory to the Agent and the Borrower. The
Special Deposit, together with all earnings on such Special Deposit, shall be
available to the Borrower solely for the replacement, repair, rebuilding or
restoration of the tangible property suffering the injury, loss or damage in
respect of which such prepayment and Special Deposit were made or to such other
purpose to which the Majority Lenders may consent in writing; provided, however,
that at such time as a Default or Event of Default shall have otherwise
occurred, the balance of the Special Deposit and earnings thereon may be applied
by the Agent to repay the Lender Debt in accordance with the terms of Section 11
hereof. The Agent shall be entitled to require proof, as a condition to the
making of any withdrawal from the Special Deposit, that the proceeds of such
withdrawal are being applied to the purposes permitted hereunder.
(d) Notwithstanding anything to the contrary in this Section 3.2, on
the date 10 days following the receipt by the Agent or any Credit Party of any
Net Proceeds of any insurance referred to in Section 9.3(c) hereof, there shall
become due and payable a prepayment of principal in respect of the Lender Debt
in an amount equal to 100% of such Net Proceeds up to $2,000,000. All
prepayments made pursuant to this Section 3.2(d) shall be applied in the manner
specified in Section 3.2(a) hereof.
(e) In the case of the receipt of Net Proceeds described in paragraph
(a) of this Section 3.2 with respect to Inventory, there shall become due and
payable a prepayment of principal in an amount equal to such Net Proceeds, which
prepayment shall be applied FIRST, to the outstanding principal of the Revolving
Advances until the Revolving Advances have been paid in full (but not in
permanent reduction thereof), SECOND, to provide Letter of Credit Cash
Collateral for any outstanding Letters of Credit, until there shall have been
provided Letter of Credit Cash Collateral equal to the undrawn amount of all
Letters of Credit, and THIRD, to the Borrower or whoever else shall be legally
entitled thereto. Any such prepayment on the Term Loan or Revolving Loan shall
be made without penalty or premium, but shall be subject to payment of any
applicable indemnity obligations pursuant to Section 2.15 hereof.
(S) 3.3. Optional Prepayments. (a) Upon not less than three
--------------------
Business Days' prior Written Notice to the Agent with respect to the Term Loan,
the Borrower shall have the right from time to time to prepay, without premium,
fee or charge (except as provided in Section 2.15 and Section 3.7 hereof), the
Term Loan in part in the amount of $500,000 or an integral multiple of $250,000
in excess thereof or at any time in whole, so long as, concurrently with the
making
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<PAGE>
of any such prepayment, the Borrower pays all accrued interest on the
amount being prepaid to such date plus any Additional Indebtedness provided for
under Section 2.15 hereof. Each optional prepayment on the Term Loan shall be
applied to the remaining installments of principal in order of maturity.
(b) Upon not less than three Business Days' prior Written Notice to
the Agent with respect to Revolving Advances constituting Eurodollar Advances
and not less than one Business Day's prior Written Notice to the Agent with
respect to Revolving Advances constituting Base Rate Advances, the Borrower
shall have the right from time to time to prepay in part, without premium, fee
or charge (except as provided in Section 2.15 hereof and Section 3.7 hereof),
any Revolving Advances, so long as each such prepayment is in the amount of
$250,000 or an integral multiple of $250,000 in excess thereof or, if less, the
then aggregate outstanding principal balance of the Revolving Loan, and so long
as, concurrently with the making of any such prepayment, the Borrower pays any
Additional Indebtedness provided for under Section 2.15 hereof.
(c) No Eurodollar Advance or portion thereof may be prepaid under
this Section 3.3 until the last day of the Interest Period therefor. Upon the
giving of notice of prepayment, the amount therein specified to be prepaid shall
be due and payable on the date therein specified for such prepayment, together
with all accrued interest thereon to such date plus any fees, premiums, charges
or costs provided for under Section 2.15 hereof. The Agent shall, promptly after
receipt of any notice of prepayment of any Advance as provided in this Section
3.3, notify each Lender in writing or by telephone confirmed promptly in writing
of the Borrower's intention so to prepay all or part of such Advance.
(S) 3.4. Procedures for Payment. (a) Each payment or prepayment
----------------------
hereunder and under the Notes shall be made not later than 2:00 p.m. (New York
City time) on the day when due in lawful money of the United States of America
to the Agent at the Payment Office in immediately available funds, without
counterclaim, offset, claim or recoupment of any kind. Each payment or
prepayment hereunder and under the Notes shall be made without setoff or
counterclaim and free and clear of, and without deduction for, any present or
future withholding or other taxes, duties or charges of any nature imposed on
such payments or prepayments by or on behalf of any Governmental Body thereof or
therein, except for Excluded Taxes. If any such taxes, duties or charges (other
than any Excluded Taxes) are so levied or imposed on any payment or prepayment
to any Lender, the Borrower will make additional payments in such amounts as may
be necessary so that the net amount received by such Lender, after withholding
or deduction for or on account of all taxes, duties or charges, including
withholdings and deductions applicable to additional sums payable under this
Section 3.4(a) (other than Excluded Taxes), and after taking into account any
credit or recovery (other than a credit or recovery with respect to Excluded
Taxes) that is available to such Lender and is utilized by such Lender (within
the taxable year in which the corresponding payment has been made pursuant to
this Section 3.4.) for or on account of any such taxes, duties or charges (other
than Excluded Taxes) will be equal to the amount provided for herein or in such
Lender's Note or Notes. At the Borrower's reasonable request, each Lender shall
prepare a written statement setting forth whether any such credit or recovery
has been utilized or can be utilized in the taxable year in which the
corresponding payment has been made pursuant to this Section 3.4. If the
Borrower reasonably disagrees with such statement, then Lender will request its
accountants or counsel to concur with
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Lender's conclusion. The concurrence by such accountants or counsel shall be
binding on all parties and the Borrower shall have no other rights with respect
to objecting to the statement prepared by any Lender. Whenever any taxes, duties
or charges (other than Excluded Taxes) are payable by the Borrower with respect
to any payments or prepayments hereunder or under any of the Notes, the Borrower
shall furnish promptly to the Agent for the account of the applicable Lender
copies (certified by the Borrower) of official receipts (to the extent that the
relevant governmental authority delivers such receipts) evidencing payment of
any such taxes, duties or charges so withheld or deducted. If the Borrower fails
to pay any such taxes, duties or charges when due to the appropriate taxing
authority or fails to remit to the Agent for the account of the applicable
Lender the required receipts evidencing payment of any such taxes, duties or
charges so withheld or deducted, the Borrower shall indemnify the affected
Lender for any incremental taxes, duties, charges, interest or penalties that
may become payable by such Lender as a result of any such failure.
(b) (i) Each Lender organized under the laws of a jurisdiction
outside of the United States (a "FOREIGN LENDER") shall provide to the
Borrower and the Agent two properly completed and executed Internal Revenue
Service Forms 4224 or Forms 1001 or other applicable forms, certificates or
documents prescribed by the Internal Revenue Service of the United States
certifying as to such Foreign Lender's entitlement to exemption from United
States withholding tax under an applicable statute or tax treaty with
respect to payments to be made to such Foreign Lender hereunder and under
the Notes ("CERTIFICATES OF EXEMPTION"). Each Foreign Lender, if a party
to this Agreement on the New Closing Date shall provide such Certificates
of Exemption on or before the New Closing Date, and shall provide a
Certificate (as hereinafter defined) on or before the first business day of
each taxable year of such Foreign Lender thereafter. Each Foreign Lender
that becomes a Lender pursuant to Section 13.14 or 13.15 hereof after the
New Closing Date shall provide (x) Certificates of Exemption, (y) properly
completed and executed Internal Revenue Service Forms 4224 or Forms 1001 or
other applicable forms, certificates or documents prescribed by the
Internal Revenue Service of the United States, certifying as to such
Foreign Lender's entitlement to a reduced rate of withholding under an
applicable statute or tax treaty with respect to payments to be made to
such Foreign Lender hereunder and under the Notes, or (z) a letter from
such Foreign Lender stating that it is not entitled to any such exemption
or reduced rate (a "LETTER OF NON-EXEMPTION" and together with any
Certificate of Exemption or any form, certificate or document referred to
in clause (y) above, each a "CERTIFICATE") on or before the date such
Foreign Lender becomes a Lender and on or before the first business day of
each taxable year of such Foreign Lender thereafter. Each Foreign Lender
further agrees to provide the Borrower and the Agent with new Certificates
(x) upon the obsolescence of any letter, form, certificate or document
previously delivered by the Foreign Lender to the Borrower and the Agent
hereunder or (y) promptly after the occurrence of any event requiring a
change in the status of the Foreign Lender or in any of the other
information provided on the most recent letter, form, certificate or
document previously delivered by the Foreign Lender to the Borrower and the
Agent hereunder. If the Borrower shall provide written notice to the
Foreign Lender that the Certificate is required, and if the Foreign Lender
does not submit the Certificate within 30 days following the receipt of
such notice and if the failure to do so increases the amount the Borrower
otherwise must pay to or on behalf of the Foreign Lender, then the Borrower
is relieved of the liability to pay the Foreign
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Lender the increased amount caused solely by such Foreign Lender's failure
to provide such Certificate and shall be permitted to deduct the increased
withholding tax from the payment due to such Foreign Lender.
Notwithstanding anything to the contrary in this clause (b)(i), the
Borrower will remain liable to the Foreign Lender for all amounts not
caused by such Foreign Lender's failure to provide the Certificate.
(ii) Each Foreign Lender shall provide to the Borrower (x) in
the case of a Foreign Lender which is a party to this Agreement on the New
Closing Date, on or before the New Closing Date, and (y) in the case of a
Foreign Lender that becomes a Lender pursuant to Section 13.14 or 13.15
hereof, on or before such Foreign Lender becomes a Lender, a statement
describing all taxes, duties or charges that are in effect and applicable
on the Closing Date or the date that such Foreign Lender becomes a Lender
hereunder, as the case may be, with respect to which the Borrower would be
required to make additional payments to such Foreign Lender under the third
sentence of Section 3.4(a) hereof.
(iii) Within thirty days after the written reasonable request of
the Borrower, each Foreign Lender shall execute and deliver to the Borrower
such certificates, forms or other documents which can be furnished
consistent with the facts and which are reasonably necessary to assist the
Borrower in applying for refunds of taxes paid by the Borrower hereunder or
making payment of taxes hereunder; provided, however, that no Foreign
Lender shall be required to furnish to the Borrower any financial
information with respect to itself or other information which it considers
confidential in its sole discretion, such determination to be final and
binding on all parties hereto.
(iv) If (A) the Certificates provided by a Foreign Lender at the
time such Foreign Lender first becomes a party to this Agreement indicate a
United States interest withholding tax in excess of zero, or (B) a Foreign
Lender that originally provided Certificates of Exemption indicating that
such Foreign Lender was exempt from United States withholding tax
thereafter ceases to qualify for such exemption, the Borrower shall have
the right to require such Foreign Lender to assign all of its Commitment
and its pro rata share of the Advances (including its pro rata share of the
interest accrued thereon) to one or more banks or financial institutions
(or branches thereof) identified by the Borrower and acceptable to the
Agent at a purchase price equal to the principal of and accrued but unpaid
interest and fees (to the date of purchase) on such Foreign Lender's
Commitment and pro rata share of the Advances.
(c) Notwithstanding anything to the contrary contained in this
Agreement, the Borrower agrees to pay any present or future stamp or documentary
taxes, any intangibles tax or any other sales, excise or property taxes, charges
or similar levies now or hereafter assessed that arise from and are attributable
to any payment made hereunder, under the Notes or from the execution, delivery
of, or otherwise with respect to, this Agreement, the Notes, the Mortgages, or
other Security Documents and any and all recording fees relating to any Loan
Documents securing any Lender Debt ("OTHER TAXES").
(d) The Borrower shall indemnify each Lender and the Agent for the
full amount of any taxes other than Excluded Taxes, or Other Taxes (including,
without limitation, any taxes
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other than Excluded Taxes, or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 3.4) duly paid or payable by such Lender or the Agent
and any liability (including penalties, interest and expenses) arising therefrom
or with respect thereto. Indemnification payments shall be made within 30 days
from the date such Lender or the Agent makes written demand therefor.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 3.4 shall survive the payment in full of principal and interest
hereunder and under the Notes indefinitely.
(f) Notwithstanding anything contained in Section 3.1 or 3.2 hereof,
the Agent shall not apply any mandatory prepayment under such Sections to any
portion of the Term Loan or Revolving Loan which constitutes a Eurodollar
Advance until the last day of the respective Interest Period therefor or the
earlier maturity of such portion of such Loan by acceleration or otherwise, such
mandatory prepayment, until it can be so applied, to be applied to the
prepayment of such portion of the Term Loan or Revolving Loan, as the case may
be, comprising Base Rate Advances. If there shall remain any portion of such
mandatory prepayment after payment in full of such portion of the Revolving Loan
constituting Base Rate Advances, then until such remaining portion of the
mandatory prepayment can be applied to the Eurodollar Advances as aforesaid,
such remaining portion of such mandatory prepayment shall be invested and
reinvested by and in the name of the Agent in investments of the type permitted
under Section 10.4(b) hereof with the type and maturity of such investments to
be mutually agreed to by the Agent and the Borrower. All interest earned on such
investments shall be for the account and risk of the Borrower. Interest earned
on any portion of principal applied to a Eurodollar Advance shall be, so long as
no Default or Event of Default shall have occurred and be continuing, and to the
extent received by the Agent, turned over to the Borrower promptly following
application of such principal to such Eurodollar Advance. As additional
collateral security for the Lender Debt, the Borrower hereby grants to the Agent
a security interest in (x) any such mandatory prepayments and any investments
thereof, including, without limitation, any certificates or instruments
evidencing any such investments, and all claims and choses in action in respect
of the foregoing, (y) any interest or other payment made in respect of such
investments, and (z) any and all proceeds of any of the above and all claims and
choses in action in respect of the foregoing (all of the foregoing constituting
part of the Collateral). To the extent the Agent makes any such investments, the
Borrower hereby authorizes the Agent to hold any certificate or instrument
evidencing such investments.
(S) 3.5. Commitment Fee. The Borrower shall pay to the Agent for the
--------------
account of the Lenders a commitment fee which shall accrue from and after the
New Closing Date until the date of the expiration, termination or cancellation
of the Revolving Credit Facility Commitment payable quarterly in arrears
beginning on the date three months after the New Closing Date, and on the same
day of every third month thereafter (and on the date of maturity or earlier
expiration, termination or cancellation of the Revolving Credit Facility
Commitment), of one-half of one percent (0.5%) per annum on the amount by which
the Revolving Credit Facility Commitment exceeds the aggregate outstanding
principal amount of the Revolving Loan (calculated daily).
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(S) 3.6. Other Fees. The Borrower shall pay to UBS for its own
----------
account certain agency, commitment, syndication and facility fees as set forth
in the Fee Letter.
(S) 3.7. Prepayments to Include Interest. All prepayments pursuant
-------------------------------
to this Section 3, except optional prepayments on Revolving Advances, shall be
made together with accrued interest to the date of such prepayment on the
principal amount prepaid.
SECTION 4. LETTERS OF CREDIT
(S) 4.1. Letters of Credit. (a) The Borrower may request (and, as
-----------------
to the Rollover Letters of Credit, the Borrower shall be deemed to have
requested on the New Closing Date), subject to the terms and conditions herein
set forth (including, without limitation, the conditions set forth in Section 7
hereof and the definitions contained in Section 1 hereof), from time to time
prior to the termination of the Revolving Credit Facility Commitment and upon
five Business Days' Written Notice (except as to the Rollover Letters of
Credit), that UBS (or any other Lender approved by UBS) issue, and UBS (or any
such other Lender) shall, subject to such conditions, issue (UBS and each such
other Lender, upon issuance of a Letter of Credit, being an "ISSUING LENDER" in
respect of such Letter of Credit) Letters of Credit; provided, however, that the
aggregate undrawn amount of all Letters of Credit at any time outstanding,
together with the amount of unreimbursed drawings thereunder and the then
aggregate unpaid principal amount of the Revolving Loan, shall not exceed the
Borrowing Limit; provided, further, that in no event shall any Lender issue any
Letter of Credit if the original undrawn amount thereof, together with the
aggregate undrawn and unreimbursed amounts of all other Letters of Credit
immediately prior to the time of such issuance, exceeds $1,500,000; provided,
further, that in no event shall UBS or any other Lender issue any Letter of
Credit if the sum of the original undrawn amount thereof plus the aggregate
undrawn and unreimbursed amounts immediately prior to the time of such issuance
of all other Letters of Credit issued by such Lender plus such Lender's pro rata
portion of the aggregate unpaid principal amount of the Revolving Loan, exceeds
such Lender's Revolving Commitment.
(b) Each Letter of Credit shall be in form, scope and substance
satisfactory to the Agent, shall be issued pursuant to a Letter of Credit
Agreement and shall expire no later than the earlier of the Maturity Date and
the date one year following the date of issuance thereof.
(c) The Borrower shall reimburse the Issuing Lender of each Letter of
Credit issued hereunder for any draft paid under such Letter of Credit
(including, without limitation, Letters of Credit issued prior to the New
Closing Date) within one Business Day following the date of such payment. The
Borrower shall to the extent of availability under the Revolving Credit Facility
Commitment effect such payment with the proceeds of a Revolving Advance (which
shall be entirely a Base Rate Advance) made to the Borrower in the amount of
such payment (whether or not any request therefor has been made by the
Borrower), which Revolving Advance shall at such time be made and applied to
payment of reimbursement of such drawing without any notice by or consent of the
Borrower (except that no such Revolving Advance shall be required to be made by
the Lenders to the extent prevented by applicable law or following any Event of
Default of the type described in Section 11.1(h) or 11.1(i) hereof, in which
case the Borrower shall nevertheless be obligated to make such payment), and
shall be repayable, together with interest thereon, in accordance with the
provisions of Section 2 hereof; provided, however,
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that no such Revolving Advance shall be made if, after giving effect thereto,
the aggregate unpaid principal amount of the Revolving Loan shall exceed
$8,000,000. The applicable Issuing Lender shall, notwithstanding the foregoing,
be entitled to the benefits of the provisions of Section 13.17 hereof as to
purchases of participations in such Letter of Credit, but only after the date
that such reimbursement, after giving effect to such postponement, shall have
become due and payable. The Issuing Lender shall promptly notify the Agent, the
other Lenders and the Borrower in writing or by telephone confirmed promptly in
writing of any such drawing under a Letter of Credit and the making of such
Revolving Advance. Any payments by an Issuing Lender of drawings under any
Letter of Credit in foreign currency shall be reimbursed by the Borrower in U.S.
dollars at the rate of exchange for cable transfers in effect on the date of
payment by such Issuing Lender.
(S) 4.2. Letter of Credit Fees. Unless otherwise agreed to in
---------------------
writing by the Borrower and an Issuing Lender with respect to any Letter of
Credit, the Borrower shall pay to the Agent for the pro rata benefit of all
Lenders, in arrears on the last day of each March, June, September and December
of each year and on the date of the full drawing, cancellation, expiration or
termination of such Letter of Credit, a fee on the average daily undrawn amount
of such Letter of Credit, issued by such Issuing Lender for such calendar
quarter or shorter period, at a rate of two and three-quarters percent (2.75%)
per annum (in either instance, computed on the basis of the actual number of
days elapsed over a year of 365 days). In addition, the Borrower shall pay to
each Issuing Lender, in respect of each Letter of Credit issued by such Issuing
Lender hereunder, on demand, all standard fees and other charges charged by such
Issuing Lender with respect to the issuance and maintenance of any Letter of
Credit.
(S) 4.3. Indemnity. The Borrower agrees to indemnify each Issuing
---------
Lender and each of its correspondents and hold it harmless from and against any
and all claims, damages, losses, liabilities, costs and expenses whatsoever
which it may incur or suffer by reason of or in connection with the execution
and delivery or assignment of or payment or presentation under or in respect of
any Letter of Credit issued by such Issuing Lender or any action taken or
omitted to be taken with respect to any Letter of Credit issued by such Issuing
Lender, except to the extent that any such claims, damages, losses, liabilities,
costs or expenses shall be caused by the willful misconduct or gross negligence
of such Issuing Lender or such correspondent in making payment against any draft
presented under any Letter of Credit which does not substantially comply with
the terms thereof, or in failing to make payment against any such draft which
strictly complies with the terms of such Letter of Credit, it being understood
that (x) in making such payment, such Issuing Lender's or such correspondent's
exclusive reliance in good faith on the documents presented to and believed to
be genuine by it in accordance with the terms of such Letter of Credit as to any
and all matters set forth therein, including, without limitation, reliance in
good faith on any affidavit presented pursuant to such Letter of Credit and on
the amount of any sight draft presented pursuant to any Letter of Credit whether
or not any statement or any other document presented pursuant to such Letter of
Credit proves to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein proves to be untrue or inaccurate in any respect
whatsoever and (y) any such noncompliance in a nonmaterial respect shall, in
each case, not be deemed willful misconduct or gross negligence of such Issuing
Lender or such correspondent. Upon demand by any Issuing Lender or such
correspondent at any time, the Borrower shall reimburse such Issuing Lender or
such correspondent for any legal or other expenses incurred in connection with
investigating or defending against any of the foregoing,
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except if the same is due to such Issuing Lender's or such correspondent's gross
negligence or willful misconduct as aforesaid. The indemnities contained herein
shall survive the expiration or termination of the Letters of Credit and this
Agreement and shall be payable upon demand.
(S) 4.4. Reimbursement of Certain Costs. (a) Unless at the time
------------------------------
prohibited by an order of a court of competent jurisdiction, the obligations of
the Borrower hereunder with regard to Letters of Credit are absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower may have against any
Person, including, without limitation, the beneficiary of such Letter of Credit
and any Issuing Lender, and all sums payable by the Borrower hereunder with
respect to any such Letter of Credit, whether of principal, interest, fees,
expenses or otherwise, shall be paid in full, without any deduction or
withholding whatsoever. In the event that the Borrower is compelled by
applicable law to make any such deduction or withholding, then, unless
prohibited by applicable law, it shall pay to each Issuing Lender such
additional amount as will result in the receipt by each Issuing Lender of a net
sum equal to the sum it would have received if no such deduction or withholding
had been required to be made.
(b) In the event that any Change of Law occurs which:
(i) subjects any Issuing Lender to any tax with respect to any
amount paid or to be paid by such Issuing Lender as the issuer of any
Letter of Credit or its commitment or agreement to honor drafts under any
Letter of Credit (other than any franchise tax and any tax measured by or
based upon the overall net income of such Issuing Lender); or
(ii) changes the basis or rate of taxation of payments to any
Issuing Lender with respect to any Letter of Credit or such commitment
(other than any franchise tax and any tax measured by or based upon the
overall net income of such Issuing Lender); or
(iii) imposes, modifies, requires, makes or deems applicable any
reserve, deposit, insurance assessment or similar requirements against any
assets held by, deposits with or for the account of, or loans or
commitments by, an office of any Issuing Lender in connection with payments
by such Issuing Lender under any Letter of Credit or commitments under any
Letter of Credit; or
(iv) imposes any condition upon or causes in any manner the
addition of any supplement to or an increase of any kind to any Issuing
Lender's capital or cost base for issuing any Letter of Credit which
results in an increase in the capital requirement supporting such Letter of
Credit; or
(v) imposes, modifies, requires, makes or deems applicable to
any Issuing Lender any capital requirement, increased capital requirement
or similar requirement such as, without limitation, the deeming of any
Letter of Credit to be an asset held by such Issuing Lender for capital
calculation or other purposes;
and the result of any of the foregoing is to reduce the after-tax rate of return
on such Issuing Lender's capital, increase the cost to any Issuing Lender of
making any payment under, or
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maintaining its commitment under, any Letter of Credit, or to reduce the amount
of any payment (whether of principal, interest or otherwise) or benefit received
or receivable by such Issuing Lender with respect to any Letter of Credit or to
require such Issuing Lender to make any payment on or calculated by reference to
the gross amount of any sum received by it with respect to any Letter of Credit,
in each case by an amount which such Issuing Lender in its sole judgment deems
material (including, without limitation, such Issuing Lender's cost of taking
action in anticipation of the effectiveness of any event referred to above in
order to enable such Issuing Lender to be in compliance therewith upon
effectiveness), then and in any such case:
(x) such Issuing Lender shall promptly notify the Borrower, the
Agent and the other Lenders in writing of the happening of such event;
(y) such Issuing Lender shall promptly deliver to the Borrower,
the Agent and the other Lenders a certificate stating the change which has
occurred or the reserve requirements or other conditions which have been
imposed on such Issuing Lender or the request, directive or requirement
with which it has complied, together with the date thereof and the amount
of such increased cost, reduction or payment; and
(z) the Borrower shall pay to such Issuing Lender, upon demand,
after delivery of the notice referred to in clause (x) above, such amount
or amounts as will compensate for such additional cost, reduction or
payment, to the extent permitted by law.
A certificate delivered by an Issuing Lender pursuant to clause (y) above as to
the additional amounts payable pursuant to this paragraph shall, in the absence
of manifest error, be conclusive evidence of the amount thereof. The protection
of this Section 4.4 shall be available to each Issuing Lender regardless of any
possible contention of invalidity or inapplicability of the applicable Change of
Laws.
(S) 4.5. Payment of Drafts. Delivery to the Agent, any Issuing
-----------------
Lender or their correspondents of any documents purporting to comply with the
requirements of any Letter of Credit shall be sufficient evidence of the
validity, genuineness, and sufficiency thereof and of the good faith and proper
performance of the shippers, drawers and/or users of any Letter of Credit, their
agents and assignees, and the Agent, such Issuing Lender and their
correspondents may rely and act thereon without liability or responsibility with
respect thereto or with respect to the correctness or condition of any shipment
of merchandise to which the same may relate. Upon receipt by the Agent or any
Issuing Lender of written approval thereof from the Borrower, the Agent or any
such Issuing Lender, as the case may be, may (but shall not be required to)
accept or pay overdrafts or irregular drafts or drafts with irregular documents
attached or with respect to which property has been substituted or time limits
have been extended, and no such acceptance or payment shall impair any rights of
the Agent or any Issuing Lender under this Agreement. In case of any variation
between the documents called for by any Letter of Credit and the documents
accepted by the Agent, an Issuing Lender or their correspondents, the Borrower
shall be conclusively deemed to have waived any right to object to such
variation with respect to any action of the Agent, such Issuing Lender or such
correspondents relating to such documents and to have ratified and approved such
action as having been taken on the direction of the Borrower, unless the
Borrower within ten Business Days of the receipt of such documents or
acquisition of knowledge of such variation files an objection with the Agent or
such Issuing
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Lender in writing. No Issuing Lender (nor the Agent) shall be liable for any
delay in giving, or failing to give, notice of the arrival of any goods or any
other notice, or for any error, neglect or default of any of its correspondents
or any shipper, carrier, bailee or insurer; nor shall any Issuing Lender (or the
Agent) be responsible for the non-fulfillment of any requirement of any Letter
of Credit that (i) drafts bear appropriate reference to any Letter of Credit,
(ii) the amount of any draft be noted on the reverse of any Letter of Credit,
(iii) any Letter of Credit be surrendered or taken up or (iv) documents be
forwarded apart from any drafts, and the Agent, each Issuing Lender and their
correspondents may, if they see fit, waive any such requirements.
(S) 4.6. Issuing Lender's Actions. Any Letter of Credit may, in the
------------------------
discretion of the Issuing Lender thereof or such Issuing Lender's
correspondents, be interpreted by it or any such correspondent (to the extent
not inconsistent with such Letter of Credit) in accordance with the Uniform
Customs and Practice for Documentary Credits of the International Chamber of
Commerce, as adopted or amended from time to time, or any other rules,
regulations and customs prevailing at the place where any Letter of Credit is
available or the drafts are drawn or negotiated. An Issuing Lender and its
correspondents may accept and act upon the name, signature or act of any party
purporting to be the executor, administrator, receiver, trustee in bankruptcy or
other legal representative of any party designated in any Letter of Credit
issued by such Issuing Lender in the place of the name, signature or act of such
party.
SECTION 5. SECURITY AND GUARANTY
As security for the full and timely payment and performance of the
Lender Debt, whether now existing or hereafter arising:
(S) 5.1. Security Agreements. (a) Each of the Credit Parties shall
-------------------
duly execute and deliver to the Agent one or more security agreements,
mortgages, pledges or assignments, substantially in the form of Exhibit 5.1-1
hereto (each as amended, supplemented or otherwise modified from time to time in
accordance with its terms, a "SECURITY AGREEMENT" and, together with any other
agreement now existing or hereafter created under this Section 5 providing
collateral security for the payment or performance of the Lender Debt,
including, without limitation, the Security Agreement, the Trademark, Patent and
Copyright Security Agreement, the Guaranties, the FCC Lease Assignments, Pledge
Agreements, the Mortgages and financing statements, in each case, as amended,
modified or supplemented from time to time, individually referred to as a
"SECURITY DOCUMENT", and collectively referred to as the "SECURITY DOCUMENTS"),
and all consents of third parties necessary to permit the effective granting of
the Liens created in such security agreements (including, without limitation, a
landlord's certificate substantially in the form of Exhibit 5.1-2 hereto (each a
"LANDLORD'S CERTIFICATE") in respect of each property subject to a Lease), in
form and substance satisfactory to the Agent, as may be required by the Agent to
grant to the Agent for the benefit of the Agent and the Lenders a valid,
perfected and enforceable first priority lien on and security interest in all
present and future personal property, tangible and intangible, and assets of
such Credit Party of every kind, wherever located, including, without
limitation, deposit accounts, business interruption insurance and all other
insurance policies, letters of credit, Receivables, Inventory, contract rights
(including, without limitation, rights under franchise contracts and rights
relating to the receipt of franchise fees), instruments, chattel paper,
certificated and uncertificated securities, general intangibles (including,
without limitation, FCC Licenses (to the maximum extent permitted by any
applicable
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Governmental Rule but subject, to the extent necessary, to the provisions of
Section 11.6 hereof), trademarks, patents, copyrights and other Intellectual
Property, excess pension funds and tax refunds), machinery and equipment,
fixtures, and all books and records, including, without limitation, computer
records and software relating to Inventory, Accounts and customer lists, in each
case, of such Credit Party or such Credit Party's Subsidiaries, wherever
located, and all proceeds of any kind thereof and products thereof, together
with:
(i) to the extent practicable, evidence of the completion of all
other recordings and filings of or with respect to the Security Documents
that the Agent may deem necessary or desirable in order to perfect and
protect the Liens created thereby (and if not practicable, promptly after
the New Closing Date),
(ii) evidence of the insurance required by the terms of any
Security Document,
(iii) copies of each assigned agreement, if any, referred to in
any Security Document, copies of all Required Consents and New Required
Consents, together with a consent (to the extent it is a Required Consent,
a New Required Consent or is otherwise obtained) to such assignment in form
and substance satisfactory to the Lenders, duly executed by each party to
such assigned agreements other than the Borrower,
(iv) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the Liens created by
the Security Documents has been taken,
(v) such amendments to the Security Documents and other documents
so as to confirm or clarify that the Lender Debt is secured by the Comcast
Assets, and
(vi) such other amendments to the Security Documents and other
documents so as to confirm or clarify that the Lender Debt continues to be
secured by the Collateral from and after the New Closing Date.
(b) The Agent shall have received:
(i) to the extent practicable, acknowledgment copies or stamped
receipt copies of proper financing statements, duly filed on or before the
day of the initial borrowing hereunder under the UCC of all jurisdictions
that the Agent may deem necessary or desirable in order to perfect and
protect the Liens created by the Security Documents, covering the
collateral described in the Security Documents (and if not practicable,
promptly after the New Closing Date), and
(ii) completed requests for information, dated on or before the
date of the initial borrowing hereunder, listing the financing statements
referred to in clause (a) above and all other effective financing
statements filed in the jurisdictions referred to in clause (a) above that
name any Credit Party as debtor, together with copies of such other
financing statements.
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(c) Upon the formation or acquisition, after the Closing Date, of any
Subsidiary of the Borrower, such Subsidiary shall execute and deliver to the
Agent a security agreement, substantially in the form of Exhibit 5.1-1 hereto,
securing all then existing or thereafter incurred Lender Debt. Nothing
contained in this Section 5.1(c) shall permit the Borrower or any Subsidiary
thereof to form or acquire any Subsidiary which is otherwise prohibited by this
Agreement, including, without limitation, Section 10.7 hereof.
(S) 5.2. Security Agreement - Intellectual Property. (a) Each
------------------------------------------
Credit Party shall duly execute and deliver to the Agent one or more security
agreements, substantially in the form of Exhibit 5.2 hereto, covering the
Intellectual Property of such Person (each as amended, supplemented or otherwise
modified from time to time in accordance with its terms, a "TRADEMARK, PATENT
AND COPYRIGHT SECURITY AGREEMENT"), then owned and hereafter acquired, together
with assignments of trademarks, patents and copyrights and other similar
documents in form suitable for filing with the United States Patent and
Trademark Office, the United States Copyright Office or any other applicable
governmental office or Governmental Body, as the case may be, and one or more
special powers of attorney and all other supplementary assignments and
instruments requested by the Agent in connection therewith.
(b) Upon the formation or acquisition, after the Closing Date, of any
Subsidiary of the Borrower, such Subsidiary shall execute and deliver to the
Agent a security agreement relating to Intellectual Property, substantially in
the form of Exhibit 5.2 hereto, securing all then existing or thereafter
incurred Lender Debt. Nothing contained in this Section 5.2(b) shall permit the
Borrower or any Subsidiary thereof to form or acquire any Subsidiary which is
otherwise prohibited by this Agreement, including, without limitation, Section
10.7 hereof.
(S) 5.3. Assignment of Life Insurance. The Borrower shall duly
----------------------------
execute and deliver to the Agent one or more assignments of the key man life
insurance policy referred to in Section 9.3(c) hereof to the extent of the first
$2,000,000 of coverage thereunder, substantially in the form of Exhibit 5.3
hereto, and such other instruments and documents as may be required by the Agent
to grant to the Agent for the benefit of the Agent and the Lenders a valid,
perfected and enforceable first Lien on and security interest in such policy.
(S) 5.4. Real Property; Mortgages; Title Insurance. (a) The
-----------------------------------------
Borrower shall duly execute and deliver to the Agent all mortgages or deeds of
trust requested by the Agent from time to time (together with any leasehold
mortgage requested by the Agent from time to time, as amended, modified or
otherwise supplemented from time to time in accordance with their respective
terms, each, a "MORTGAGE") in respect of the real property owned by the Borrower
(including, without limitation, the Real Estate owned by the Borrower on the New
Closing Date and listed on Schedule 5.4 hereto) so as to create in the Agent's
favor, for the benefit of the Agent and for the pro rata benefit of the Lenders,
upon recordation thereof, a valid, perfected and enforceable first priority Lien
on the Real Estate and improvements described therein, such Mortgages to be in
form and substance reasonably satisfactory to the Agent. Schedule 5.4 shall
also list all Real Estate for which the Agent has not requested the Borrower to
execute and deliver a Mortgage; provided, however, the failure by the Agent at
any time to request a Mortgage with respect to any Real Estate shall not operate
or be construed as a waiver of the Agent's right to so request the Borrower to
execute and deliver such a Mortgage until such time
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as there shall be outstanding no Loans and no Commitments and the Letter of
Credit Usage shall be zero.
(b) Upon the Borrower or any Subsidiary thereof acquiring any real
property with a value (lower of cost or fair market value) in excess of
$100,000, the Borrower or such Subsidiary shall, to the extent requested by the
Agent or the Majority Lenders, execute and deliver a Mortgage and such other
documents as may be reasonably requested by the Lenders with respect thereto.
This Section 5.4 shall not be deemed to allow any Credit Party to acquire any
property if otherwise prohibited by this Agreement.
(c) The Borrower shall furnish to the Agent, in sufficient copies for
each Lender, for the benefit of the Agent and the Lenders, at the Borrower's
expense, a policy of mortgagee title insurance, in form, substance and amount
reasonably satisfactory to the Agent, insuring that each of the Mortgages will
be a valid and perfected Lien in favor of the Agent on the interest of the
Borrower, in, to and under the real property and improvements described therein,
and that the Borrower has good and marketable title thereto, to be issued by a
title insurance company reasonably satisfactory to the Agent, together with
satisfactory evidence that all title insurance premiums have been fully paid.
The Borrower shall furnish to the Agent, in sufficient copies for each Lender,
certified surveys of real property and such other certificates and documents as
the Lenders may reasonably request and which are customary in financings of this
type. The Borrower shall cooperate with the Agent's engagement of appraisers,
and the Agent shall have received such appraisals of such real property or
leasehold interest as shall be required under applicable law, including, without
limitation, the Financial Institutions Reform, Recovery and Enforcement Act of
1989, as amended from time to time, with respect to any Real Estate to be
subject to a Mortgage on or prior to the taking of such Mortgage. To the extent
requested by the Agent, the Borrower shall, at the Borrower's sole cost and
expense, furnish to the Agent for the benefit of the Lenders flood insurance
with respect to any Real Estate subject to a Mortgage which is located in an
area identified by the United States Department of Housing and Urban Development
as having a flood hazard risk (including, without limitation, Zones A, B, C and
V).
(S) 5.5. Filing and Recording. (a) The Borrower shall, at its cost
--------------------
and expense, cause all instruments and documents given as security pursuant to
this Agreement to be duly recorded and/or filed or otherwise perfected in all
places necessary, in the opinion of the Agent, to perfect and protect the Lien
of the Agent in the property covered thereby.
(b) Each of the Credit Parties hereby authorizes the Agent to file
one or more financing statements or continuation statements or amendments
thereto or assignments thereof in respect of any Lien created pursuant to this
Agreement and the Security Documents which may at any time be required or which,
in the opinion of the Agent, may at any time be desirable without the signature
of such Credit Party where permitted by law.
(c) In the event that any re-recording or refiling of any financing
statement (or the filing of any statements of continuation or amendment or
assignment of any financing statement) is required to protect and preserve such
Lien, the Borrower shall, at its cost and expense, cause the same to be recorded
and/or refiled at the time and in the manner requested by the Agent.
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(S) 5.6. Interpretation of Security Documents. In the case of any
------------------------------------
conflict between the terms and provisions of a Security Document and this
Agreement, the terms and provisions of this Agreement shall control, unless the
terms of such Security Document expressly provide otherwise.
(S) 5.7. Guaranties. (a) On or prior to the Closing Date, each
----------
Guarantor in existence on the Closing Date shall execute and deliver to the
Agent a guaranty, substantially in the form of Exhibit 5.7 hereto (each as
amended, supplemented or otherwise modified from time to time in accordance with
its terms, a "GUARANTY"), of all Lender Debt, including, without limitation, all
present and future Lender Debt.
(b) Upon the formation or acquisition, after the Closing Date, of any
Subsidiary of the Borrower, such Subsidiary shall execute and deliver to the
Agent a guaranty, substantially in the form of Exhibit 5.7 hereto, of all then
existing or thereafter incurred Lender Debt. Nothing contained in this Section
5.7(b) shall permit the Borrower or any Subsidiary thereof to form or acquire
any Subsidiary which is otherwise prohibited by this Agreement, including,
without limitation, Section 10.7 hereof.
(S) 5.8. Pledge of Equity Interests. MLP Acquisition, L.P., MLP
--------------------------
Administration Corp., each holder of Class A-1 Partnership Interests and Class B
Partnership Interests, and, to the extent that any Subsidiary is created by the
Borrower in accordance with the terms hereof, the Borrower, shall each promptly
and duly execute and deliver to the Agent the certificates of partnership
interests, together with one or more pledge agreements and endorsements in
blank, substantially in the form of Exhibit 5.8 hereto, as applicable (each as
amended, supplemented or otherwise modified from time to time in accordance with
its terms, a "PLEDGE AGREEMENT"), covering, to the extent of its interest
therein, (i) all equity interests in the Borrower (other than the Class A-2
Partnership Interests and the Class C Partnership Interests), (ii) all equity
interests in MLP Communications Company, (iii) all equity interests (corporate
or partnership) now existing or hereafter issued in each present and future
Subsidiary of the Borrower, and (iv) all proceeds thereof, pursuant to which
such Persons shall grant to the Agent for the benefit of the Agent and the
Lenders a valid, perfected and enforceable first priority Lien on all of the
foregoing, together with certificates representing the equity interests or
capital stock referred to therein, accompanied by undated stock powers or
assignments thereof executed in blank.
(S) 5.9. Non-Recourse to Partners. The Lender Debt is fully recourse
------------------------
to the Borrower, the Guarantors and their respective Assets, but, except as set
forth in the proviso below, the recourse of the Partners in their respective
capacities as Partners for the Lender Debt is limited to the Partnership
Interests of such Partners and the assets of the Credit Parties, and the
recourse of MLP Acquisition, L.P. and MLP Administration Corp. in their
respective capacities as general partners of MLP Communications Company is
limited to the partnership interests of such partners in, and the assets of MLP
Communications Company, and is otherwise non-recourse. No Partner nor any
partner, legal representative, heir, estate, successor or assign of any such
Partner or any officer, director, shareholder or partner in any such Partner or
Partners, whether disclosed or undisclosed, in each case solely in their
respective capacities as such, shall have any personal liability under the Loan
Documents for (i) the payment of any sum of money which is or may be payable
under the Loan Documents, including, but not limited to, the repayment of the
Loans or (ii) the performance or discharge of any covenant or undertakings of
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any Credit Party under the Loan Documents; provided, however, that the foregoing
shall not in any way affect the validity or enforceability of any of the Loan
Documents against the Credit Parties being party thereto or, in particular, the
Pledge Agreements in accordance with their respective terms against the
respective parties thereto (including, without limitation, the pledge of equity
interests thereunder) or otherwise exonerate any Partner in respect of its
receipt of distributions made in contravention of this Agreement, the
Partnership Agreement or any other agreement governing any Credit Party.
SECTION 6. CONDITIONS PRECEDENT TO INITIAL
BORROWING AND ISSUANCE OF LETTERS OF CREDIT
The obligation of each Lender to lend its pro rata portion of the Term
Loan and the Revolving Advance to be made on the New Closing Date or to issue
any Letter of Credit on the New Closing Date is, in each case, subject to
fulfillment (or waiver in writing by the Majority Lenders or, as to the
conditions set forth in Section 6.1(b), by the Agent) of the following
conditions precedent (assuming that the Comcast Acquisition, if it becomes
effective, and the making of the Loans by the Lenders, if made, occur
simultaneously on the New Closing Date):
(S) 6.1. Opinions of Counsel. (a) The Agent shall have received on
-------------------
or before the day of such initial borrowing, from (i) Messrs. Rosenman & Colin,
special counsel to the Borrower, in sufficient copies for each Lender, favorable
opinions addressed to the Lenders and the Agent and dated the New Closing Date,
substantially in the form of Exhibit 6.1-1 hereto; (ii) Messrs. Heller, Ehrman,
White & McAuliffe, counsel to the Borrower, in sufficient copies for each
Lender, favorable opinions addressed to the Lenders and the Agent and dated the
New Closing Date, substantially in the form of Exhibit 6.1-2 hereto; and (iii)
from such other counsel which the Agent may reasonably request, in sufficient
copies for each Lender, one or more favorable opinions addressed to the Lenders
and the Agent and dated the New Closing Date, in form and substance reasonably
satisfactory to the Lenders and the Agent.
(b) The Agent shall have received on or before the day of such
initial borrowing a favorable opinion of Messrs. Kaye, Scholer, Fierman, Hays &
Handler, special counsel to the Agent, in form and substance satisfactory to the
Agent.
(S) 6.2. Financial Status. (a) The Agent shall have received
----------------
audited financial statements of CSCI and its Subsidiaries for the three most
recent fiscal years. The Agent shall also have received a copy of a letter
addressed to the Borrower or Centre Partners from Deloitte & Touche, stating
that Deloitte & Touche has reviewed the audit work papers of the Transferors and
performed agreed-upon procedures for the most recent fiscal year, together with
an accompanying report with respect thereto, all in form and substance
acceptable to the Agent. The quantity and quality of current financial and
other information provided to the Agent will be reasonably satisfactory for the
Agent's evaluation of the creditworthiness of the Borrower. Further, the Agent
shall have received a pro forma opening balance sheet of the Borrower after
giving effect to the Comcast Acquisition and such projections as the Agent shall
have reasonably requested, in each case, in form and substance reasonably
satisfactory to the Agent, and the financial results and prospects of the
Borrower and the Transferors through the Closing Date shall be consistent in all
material respects, in the reasonable opinion of the Agent, with the most
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recent financial statements delivered in accordance with the terms of the
Original Credit Agreement and the projections of the Borrower following the
consummation of the Comcast Acquisition, dated January 21, 1994, and delivered
to the Agent by the Borrower in connection herewith.
(b) The Lenders shall have received such other financial and other
information as the Agent shall have reasonably requested, and the quantity and
quality of such information shall reasonably satisfactory for the Lenders'
evaluation of the creditworthiness of the Borrower.
(c) In the judgment of the Agent, (i) no material adverse change
shall have occurred in the business, operations, liabilities, assets,
properties, prospects or condition (financial or otherwise) of the Borrower
since September 30, 1993, as reflected in the latest financial statements of the
Borrower as at and for the period ending as of such date; (ii) no material
adverse change shall have occurred in the business, operations, liabilities,
assets, properties, prospects or condition (financial or otherwise) of the
Transferors since September 30, 1993, as reflected in the financial statements
of CSCI and its Subsidiaries as at and for the period ending as of such date;
(iii) the Agent shall not have become aware of any previously undisclosed
materially adverse information with respect to the Borrower or the Transferors;
and (iv) no material adverse change in the financial markets for leveraged
acquisitions shall have occurred since November 24, 1993; provided, that the
inability by the Agent to syndicate the Loans shall not in itself be deemed to
constitute such a material adverse change.
(S) 6.3. Qualification. Each Credit Party shall be duly qualified
-------------
and in good standing in each jurisdiction in which it owns or leases property or
in which the conduct of its business requires it to so qualify, except where the
failure to so qualify would not have a Material Adverse Effect.
(S) 6.4. Security Documents and Instruments. The Agent shall have
----------------------------------
received, in sufficient copies for each Lender, all the instruments and
documents then required to be delivered pursuant to Section 5 hereof (including,
without limitation, the Mortgages on the Real Estate listed on Schedule 5.4
hereto) or any other provision of this Agreement or pursuant to the instruments
and documents referred to in Section 5 hereof and the same shall be in full
force and effect and shall grant, create or perfect the Liens, rights, powers,
priorities, remedies and benefits contemplated herein or therein, as the case
may be.
(S) 6.5. Guaranteed Note, Put and Call, and the Guaranteed Loan
------------------------------------------------------
Guarantees. UBS shall have received (and each Lender shall have received copies
- ----------
of) the Guaranteed Note, Put and Call and the Guaranteed Loan Guarantees, duly
executed by the Persons party thereto, and the same shall be in full force and
effect and shall grant, create or perfect the rights, powers, priorities,
remedies and benefits contemplated therein.
(S) 6.6. Evidence of Insurance. The Agent shall have received, in
---------------------
sufficient copies for each Lender, evidence, in form, scope and substance and
with such insurance carriers reasonably satisfactory to the Agent, of all
insurance policies required pursuant to Section 9.3 hereof. The Agent shall have
received a letter, satisfactory to it in form, scope and substance, from an
insurance broker acceptable to the Agent confirming that the amount of insurance
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obtained under such policies, and the terms and conditions thereof, are
reasonable and appropriate in the context of the business of the Borrower.
(S) 6.7. Borrowing Certificates. The Agent shall have received a
----------------------
Borrower's Certificate dated the date of such initial borrowing and a Borrowing
Base Certificate dated the date of such initial borrowing, in each case signed
by the chief executive officer or the chief financial officer of the Borrower
and based upon the estimated opening balance sheet of the Borrower immediately
following the Comcast Acquisition as prepared by such chief financial officer.
(S) 6.8. The Original Notes and the Notes. Each of the Original
--------------------------------
Notes shall have been returned to the Borrower for cancellation and each Lender
shall have received its Notes, each duly completed, executed and delivered in
accordance with Sections 2.4 and 2.6 hereof.
(S) 6.9. Accrued Interest on the Original Notes. The Borrower shall
--------------------------------------
have paid to the Lenders all accrued and unpaid interest (calculated to the New
Closing Date) on the Loans, regardless of whether such interest is due and
payable (including, without limitation, all accrued and unpaid interest on the
Rollover Eurodollar Advances), together with any amounts payable under Section
2.15(a) hereof.
(S) 6.10. Comcast Acquisition. The Borrower shall have acquired,
-------------------
after giving effect to the transactions contemplated by the Comcast Purchase
Agreement, all of the Comcast Assets pursuant to and strictly in accordance with
the terms of the Comcast Purchase Agreement, which Comcast Assets shall be owned
by the Borrower free and clear of any and all Liens (including, without
limitation, all intercompany Liens, but other than Permitted Liens) and on the
terms and conditions set forth in the Comcast Purchase Agreement, such
acquisitions to occur without waiver, amendment or modification of any of the
provisions thereof (including, without limitation, with respect to the
assumption of liabilities thereunder) except such waiver, amendment or
modification as may have been approved by the Agent, and in compliance in all
material respects with all applicable law and regulations. The terms and
conditions of the Comcast Acquisition and the Comcast Purchase Documents shall
be in form, scope and substance reasonably satisfactory to the Agent. A copy of
all deliveries required under Section 3.2 of the Comcast Purchase Agreement
shall have been delivered and all other conditions precedent under Article VIII
of the Comcast Purchase Agreement shall have occurred, each without waiver,
amendment or modification of any of the provisions thereof, except such waiver,
amendment or modification as may have been approved by the Agent. All necessary
consents and approvals of all Persons to the Comcast Acquisition and the
consummation of the transactions contemplated in connection therewith
(including, without limitation, the New Required Consents, without waiver,
amendment or modification thereto, except such waiver, amendment or modification
as may have been approved by the Agent) shall have been obtained, in form and
substance satisfactory to the Agent.
(S) 6.11. Confirmations with Respect to the Rollover Letters of
-----------------------------------------------------
Credit. The Borrower shall have delivered to each Issuing Lender confirmations
- ------
of the Borrower's Obligations (including, without limitation, reimbursement
obligations) with respect to each Rollover Letter of Credit.
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(S) 6.12. Financing and Increasing the Original Term Loan and
---------------------------------------------------
Original Revolving Advances. Except as described on Schedule 6.12 hereto with
- ---------------------------
respect to certain Eurodollar Loans and Letters of Credit outstanding
immediately prior to the New Closing Date, all amounts outstanding under the
Original Term Loan (including, without limitation, all accrued interest thereon)
shall have been financed in full and increased with the proceeds of the Term
Loan and all amounts outstanding under the Original Revolving Advances
(including, without limitation, all accrued interest thereon) shall have been
financed in full with the proceeds of the initial Revolving Advance.
(S) 6.13. Compliance with Law and Related Documents. The Comcast
-----------------------------------------
Acquisition and the transactions contemplated under this Agreement and the Loan
Documents shall (i) be in compliance with the certificate of limited partnership
of the Borrower, (ii) be in compliance in all respects with all applicable laws
and regulations of the United States, each state thereof and each subdivision of
any such state, including, without limitation, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, except, in each case, where non-compliance
would not have a Material Adverse Effect as to the Borrower, and (iii) have been
duly approved by the Managing General Partner.
(S) 6.14. FCC Matters and Compliance. All of the FCC Licenses shall
--------------------------
be held by MLP Communications Company, shall be in full force and effect and
shall be subject to FCC Leases and FCC Lease Assignments.
(S) 6.15. Payment of Indebtedness by the Transferors. The Agent
------------------------------------------
shall have received information reasonably acceptable to it that all non-
contingent Indebtedness of each of the Transferors (other than Comcast
Corporation, Comcast Real Estate Holdings, Inc., Comcast Sound Communications,
Inc., an Illinois corporation, and Comcast Sound Communications, Inc., a
Colorado corporation) outstanding immediately prior to the New Closing Date
(including, without limitation, all intercompany Indebtedness) is simultaneously
being discharged by the Transferors, assumed in full by Comcast Corporation,
paid in full, or assumed by the Borrower, or the Agent otherwise shall have
received such additional information and documentation with respect to such
indebtedness that is acceptable to the Agent in its sole discretion. Without in
any way limiting the foregoing, the Agent shall have received information
reasonably acceptable to it that all Indebtedness with respect to which a Lien
(other than a Permitted Lien) on the Comcast Assets or any portion thereof was
held on or prior to the New Closing Date and all intercompany Indebtedness or
Indebtedness of the Transferors to its Affiliates simultaneously is being
discharged or otherwise paid in full.
(S) 6.16. Consent of Barclays as Holder of the Subordinated Notes.
-------------------------------------------------------
(a) Barclays, as the holder of 100% of the Subordinated Notes, shall have
consented to (i) the Comcast Acquisition, (ii) the Borrower entering into this
Agreement, and (iii) all other transactions contemplated herein and therein.
(S) 6.17. Arrangement Among Investors; Capital Contribution. All
-------------------------------------------------
contracts and arrangements by and among investors in the Borrower shall be
satisfactory to the Agent. The Agent shall have received evidence, in form and
substance reasonably satisfactory to the Agent, of the Issuance by the Borrower
of 1,171,921 units of Class C-1 Partnership Interests to the C-1 Holders, in
exchange for a $5,000,000 capital contribution to the Borrower.
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(S) 6.18. Examination of Books. The Agent shall have been afforded
--------------------
the opportunity prior to closing, to review the books, records, leases,
contracts, franchise contracts, satellite lease agreements, pension plans,
insurance coverage and properties of the Transferors and to perform such other
legal due diligence regarding the Transferors as the Agent shall have required,
the results of which review and due diligence shall have been reasonably
satisfactory to the Agent and its counsel.
(S) 6.19. Corporate Structure. The Lenders shall be satisfied in all
-------------------
respects with the legal structure and capitalization of each of the Credit
Parties and of each General Partner and all documentation relating thereto,
including, without limitation, the amendments to the Partnership Agreement to be
effectuated on the New Closing Date (which shall, in any event, include the
waiver of the 'Transfer Restrictions', as described in the Commitment Letter),
and the terms and conditions of each other charter or partnership agreement, by-
laws and each class of capital stock of each Credit Party, the General Partners,
MLP, MLP Communications Company and Music Holdings Corp.
(S) 6.20. Other Company Matters. The Lenders shall be satisfied in
---------------------
full as to the matters listed on the schedules to the Comcast Purchase
Agreement, including, without limitation, the schedules attached thereto.
(S) 6.21. Fees to Agent and Lenders. All fees and reimbursable
-------------------------
expenses payable to the Agent, UBS or any one or more of the Lenders with
respect to the financing hereunder or under the Commitment Letter or Fee Letter
on or prior to the New Closing Date shall have been paid in full in immediately
available funds.
(S) 6.22. Management. (a) The Lenders shall be reasonably satisfied
----------
with the management and board of directors or general partners, as applicable,
of each of the Borrower, its Subsidiaries, the holders of the equity interests
in the Credit Parties and the Subordinated Indebtedness (other than Barclays)
and the arrangements and agreements by and among each of the Credit Parties. No
change in Muzak Management (as employed with the Borrower immediately prior to
the New Closing Date) shall have occurred or be contemplated.
(b) The Borrower shall have delivered to the Agent and the Lenders
copies of all amendments or substitutions to or modifications to all Executive
Agreements (including, without limitation, all amendments, substitutions or
modifications to the Management Option Plan and all other stock options and
warrants, if any, and all amendments, substitutions or modifications to the
employment agreement between the Borrower and Mr. John Jester) entered into
after the Closing Date by and among any of the Credit Parties or the General
Partner, any shareholder of any thereof or any officer or Affiliate of any
thereof relating to any of the Credit Parties, each of which shall be acceptable
to the Agent.
(S) 6.23. Disbursement Authorization. The Agent shall have received
--------------------------
a disbursement authorization letter, substantially in the form of Exhibit 6.23
hereto, duly executed and delivered by the Borrower as to the disbursement on
the New Closing Date of the proceeds of the Term Loan and the initial Revolving
Advance.
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(S) 6.24. Litigation. No litigation, proceeding, action, charge,
----------
claim, demand, suit, petition, governmental investigation or injury before or by
any arbitrator or governmental authority shall be continuing or, to the
knowledge of the Borrower, the Agent or any Lender, threatened, (i) in
connection with this Agreement, the other Loan Documents, the Subordinated Loan
Documents, the Purchase Documents, the Guaranteed Loan Documents, the Comcast
Purchase Documents, the Partnership Agreement or any of the transactions
contemplated thereby which, in the reasonable business judgment of the Agent or
the Lenders, would reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the ability of Centre Partners or MLP to finance the
Comcast Acquisition, or (ii) involving the Borrower, either General Partner,
Music Holdings Corp., the Transferors, Centre Partners, MLP or any other Centre
Partners Entity, or any Lender (relating to this transaction), in each case
which, if adversely determined, would, in the reasonable business judgment of
the Agent or the Lenders, have a Material Adverse Effect or a material adverse
effect on the ability of Centre Partners and MLP to finance the Comcast
Acquisition and there shall have occurred no development in any such action,
charge, claim, demand, suit, proceeding, petition, governmental investigation,
arbitration, litigation or inquiry that, in the reasonable business judgment of
the Agent or the Lenders, would have a Material Adverse Effect or a material
adverse effect on the ability of Centre Partners and MLP to finance the Comcast
Acquisition. No judgment, injunction or other restraining order shall have been
issued and remain in effect and no hearing to cause a judgment, injunction or
other restraining order shall have been issued and remain in effect and no
hearing to cause a judgment, injunction or other restraining order to be issued
shall be pending or noticed with respect to any action, suit or proceeding
seeking to enjoin or otherwise prevent the consummation of, or to recover any
damages or obtain relief as a result of, any of the documents referred to above
or any of the transactions contemplated thereby. The Borrower shall not be in
default under any demand, award, judgment, order, decree, consent, material
conciliation agreement or material settlement agreement.
(S) 6.25. Compliance with Law. The Agent shall be satisfied that
-------------------
each Credit Party (i) has obtained all authorizations and approvals of all
Governmental Bodies required for the due execution, delivery and performance by
such Credit Party of each of the Loan Documents and Guaranteed Loan Document to
which it is or will be a party and for the perfection of or the exercise by the
Agent, UBS and each Lender of their respective rights and remedies under the
Loan Documents, and (ii) shall be in compliance with, and shall have obtained
appropriate approvals pertaining to, all applicable laws, rules, regulations and
orders, including, without limitation, all governmental, environmental, ERISA
and other requirements, regulations and laws, the violation or failure to obtain
approvals for which would have a Material Adverse Effect as to such Credit
Party.
(S) 6.26. Proceedings; Receipt of Documents. All requisite corporate
---------------------------------
and/or partnership action and proceedings in connection with the borrowings and
the execution and delivery of the Loan Documents and the Guaranteed Loan
Documents, the issuance of the Letters of Credit, and the issuance of the Notes
shall be satisfactory in form and substance to the Agent and the Agent shall
have received, on or before the New Closing Date, all information and copies of
all documents, including, without limitation, records of requisite corporate
and/or partnership action and proceedings, which the Agent may have requested in
connection therewith, such documents where requested by the Agent to be
certified by appropriate corporate Persons or Governmental Bodies. Without
limiting the generality of the foregoing, the Agent shall have
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received on or before the New Closing Date the following, each dated such day
(unless otherwise specified), in form and substance satisfactory to the Agent
(unless otherwise specified) and, except for the Notes and the Guaranteed Note,
in sufficient copies for each Lender:
(i) a copy of the Partnership Agreement and all documents filed
with the Secretary of State of the State of Delaware, and all amendments
thereto, certified, if applicable (as of a date reasonably near the date of
the initial borrowing), by the Secretary of State of the State of Delaware
as being a true and correct copy thereof;
(ii) a copy of the partnership documents, including the
partnership agreement, of each General Partner which is a partnership, each
Subsidiary, MLP, CCI and MLP Communications Company, and a copy of the
certificate of incorporation of MLP Administration Corp. and Melody Inc. of
Delaware, and all amendments thereto, in each applicable case certified (as
of a date reasonably near the date of the initial borrowing), by the
Secretary of State of the State of Delaware;
(iii) certified copies of all consents or other partnership
action of the Borrower approving the Comcast Acquisition, this Agreement,
the Notes, the Guaranteed Note, each other Loan Document and each
Guaranteed Loan Document and Purchase Document to which it is a party, and
of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to the Comcast Acquisition,
this Agreement, the Notes, each other Loan Document, each Guaranteed Loan
Document and Purchase Document to which it is a party;
(iv) certified copies of all consents or other partnership
action and the resolutions of the Board of Directors of the General
Partners, as applicable, approving the Guaranties and all other
transactions contemplated hereby and the General Partner's obligations
under the Partnership Agreement;
(v) certified copies of all consents or other partnership action
and the resolutions of the general partners of CCI and MLP, as applicable,
approving the Guaranteed Loan Documents to which it each is a party and all
other transactions contemplated thereby;
(vi) a copy of a certificate of the Secretary of State of each
State listed on Schedule 6.26 hereto, dated a date reasonably near the date
of the initial borrowing, stating that the Borrower, each Credit Party,
each Subsidiary, MLP, CCI and each General Partner which is a corporation
or partnership, as the case may be, is duly qualified and in good standing
as a foreign entity in such State;
(vii) a certificate of each Credit Party, each General Partner
which is a partnership, MLP Administration Corp., MLP and CCI signed on
behalf of such Person by its general partner, president or vice president,
certifying as to (A) the absence of any amendments to the charter of such
Person since the date of the Secretary of State's certificate for such
Person referred to above, (B) a true and correct copy of the partnership
agreement or bylaws of such Person, as applicable as in effect on the date
of the initial borrowing;
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(viii) a certificate of a general partner or the Secretary or an
Assistant Secretary of each Credit Party, each General Partner which is a
partnership, MLP Administration Corp., MLP, CCI as applicable, certifying
the names and true signatures of the officers of such Person authorized to
sign, on behalf of such Person, this Agreement, the Notes, each other Loan
Document, the Guaranteed Note and each other Guaranteed Loan Document, in
each case to which such Person is a party or by which it is bound;
(ix) copies of all amendments, waivers and modifications since
the Closing Date to the Subordinated Loan Documents and the Purchase
Documents, which shall be satisfactory in form, scope and substance to the
Agent, and which shall be certified by the Borrower's President to be true
and complete in all respects and to have been duly executed and delivered
by the Borrower; and
(x) a copy of all documents delivered to the Borrower pursuant
to Article III of the Comcast Purchase Agreement.
(S) 6.27. Projections, etc. The Agent shall have received the
-----------------
Borrower's most recent projections, dated the New Closing Date, in form and
substance reasonably satisfactory to the Agent, of the future financial
performance of the Borrower and its Subsidiaries for the period through December
31, 1997, including a pro forma opening balance sheet of the Borrower after
giving effect to the Comcast Acquisition (the "LATEST PROJECTIONS") and such
other information relating to the Borrower and its Subsidiaries as the Agent may
reasonably have requested, in each case, in form and substance reasonably
satisfactory to the Agent. The financial results of the Borrower through
September 30, 1993 and the information contained in the projections, dated
January 21, 1994 provided to the Agent by Centre Partners (the "REFERENCE
PROJECTIONS") shall, in the opinion of the Agent, be consistent in all material
respects with the Latest Projections. In the opinion of the Agent, there shall
have occurred no event or financial result materially inconsistent with
achieving the results contained in the Reference Projections or which has
impaired the Agent's continuing confidence in the Reference Projections.
(S) 6.28. Accountant's Tax Letter. The Borrower shall have delivered
-----------------------
to the Agent, on or before the New Closing Date, in sufficient copies for each
Lender, copies of a letter from a "Big 6" accounting firm acceptable to the
Agent addressed to the Borrower prepared in contemplation of the Comcast
Acquisition, such letter to be in form, scope and substance reasonably
satisfactory to the Agent and the Lenders, as to the tax basis and other tax
attributes and depreciation or amortization schedules of the Comcast Assets, in
each case, owned by the Borrower, all of which, as set forth in such letter or
memorandum, shall not differ significantly from the Reference Projections.
(S) 6.29. Subordination Provisions. (a) The Agent shall have
------------------------
approved the terms and conditions of any amendments to the Subordinated Note,
the Earn-Out Note and the Class C Exchange Note and related documentation
relating thereto, including, without limitation any amendments to the
Subordination Agreements and the subordination provisions in the Subordinated
Loan Documents to reflect the transactions contemplated in connection with the
Comcast Acquisition and the amendments effectuated by this Agreement.
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(b) The Agent shall have approved the terms and conditions of the
Class C-1 Exchange Note and related documentation relating thereto, including,
without limitation the Class C-1 Subordination Agreement and the subordination
provisions in the Subordinated Loan Documents with respect thereto.
(S) 6.30. Solvency. The Agent shall have receive an opinion from the
--------
chief financial officer of the Borrower, in form, scope and substance reasonably
satisfactory to Agent, to the effect that at the New Closing Date, both
immediately prior to and after giving effect to the transactions contemplated
under the Loan Documents and or to occur in connection with the Comcast
Acquisition, the Borrower is Solvent. The pro forma opening balance sheet of the
Borrower shall indicate, and chief financial officer of the Borrower shall
further certify, that after giving effect to the Comcast Acquisition, the
Borrower shall have a positive net worth (excluding goodwill) based on the
appraised value of the assets, all in a manner reasonably satisfactory to the
Agent.
(S) 6.31. Environmental Review. The Agent shall have been afforded
--------------------
the opportunity prior to the New Closing Date, to discuss the results of the
environmental review conducted by ATEC Environmental Consultants and to discuss
environmental issues with representatives of the Borrower, with respect to all
properties reviewed by ATEC Environmental Consultants and the results of such
discussions and such review shall be reasonably satisfactory to the Agent.
(S) 6.32. Appraisals. The Agent shall have received appraisals
----------
delivered to the Agent with respect to the real property owned in fee or leased
by the Borrower, which appraisals shall be from an appraisal firm engaged by the
Agent (whose fees and expenses shall be paid directly by the Borrower) and in
form and substance reasonably satisfactory to the Agent and shall demonstrate to
the satisfaction of the Agent that all applicable requirements of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989, as amended from time
to time, shall have been satisfied.
(S) 6.33. Title Insurance Endorsements. The Agent shall have
----------------------------
received such endorsements (if available), in form and substance satisfactory to
the Agent, to the mortgagee title insurance policies issued to the Agent with
respect to the Mortgages as the Agent shall have reasonably requested; such
endorsements to provide, among other things, assurances of the priority of such
Mortgages.
(S) 6.34. CCI and MLP Partnership Agreements. (i) The partnership
----------------------------------
agreements for MLP and CCI shall have been approved in form and substance by
UBS, including, without limitation, as to the obligations in respect of capital
calls and the continuing availability of at least $11 million in capital under
each such partnership agreement, and (ii) UBS shall be satisfied as to the
legality, binding effect and enforceability of the Guaranteed Loan Guarantees
and the Put and Call and shall have received legal opinions as to the Guaranteed
Loan Guarantees and the Put and Call, from independent counsel acceptable to
UBS, in form, scope and substance acceptable to UBS.
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(S) 6.35. Special Counsel Fees. Messrs. Kaye, Scholer, Fierman, Hays
--------------------
& Handler, special counsel to the Agent, shall have received payment in full of
all fees, costs and expenses relating to the transactions contemplated by this
Agreement billed on or prior to the New Closing Date.
SECTION 7. CONDITIONS PRECEDENT TO EACH BORROWING AND
ISSUANCE OF LETTERS OF CREDIT
The obligation of the Lenders to make the Term Loan or any Revolving
Advance or to issue any Letter of Credit (including the initial Revolving
Advance to occur on the New Closing Date) is subject to fulfillment of the
following conditions precedent unless waived in writing by the Majority Lenders
(assuming that the Comcast Acquisition, if it becomes effective, and the making
of the Loans by the Lenders, if made, occur simultaneously on the New Closing
Date):
(S) 7.1. Borrower's Certificate; Other Conditions. (a) The Borrower
----------------------------------------
shall have delivered to the Agent a Borrower's Certificate dated the date of the
Term Loan, Revolving Advance or Letter of Credit, as the case may be.
(b) (i) All representations and warranties made by each of the Credit
Parties contained herein or otherwise made in any Loan Document (including,
without limitation, in each Borrower's Certificate), officer's certificate or
any agreement, instrument, certificate, document or other writing delivered to
the Agent or any Lender in connection herewith or therewith, shall be true and
correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
borrowing or issuance of such Letter of Credit (unless any such representation
or warranty speaks as of a particular date, in which case it shall be deemed
repeated as of such date);
(ii) On the date of such borrowing or issuance there shall exist no
Default or Event of Default;
(iii) If the Borrower shall be requesting a Letter of Credit, the
Agent on behalf of any Issuing Lender shall have (to the extent requested by any
Issuing Lender) received a duly executed and delivered Letter of Credit
Agreement with respect thereto;
(iv) The Borrower shall have complied with all procedures and given
all certificates, notices and other documents required hereunder for such
advance or issuance; and
(v) The Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may have reasonably requested.
(S) 7.2. Written Notice of Advance. Except as otherwise
-------------------------
provided in Section 4.1(c) hereof, prior to the time of each Advance or the
renewal or conversion of any Advance, or portion thereof, the Agent shall have
received Written Notice of such Advance or the renewal or conversion of such
Advance, or portion thereof, as the case may be, in accordance with Section 2
hereof.
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SECTION 8. USE OF PROCEEDS
(S) 8.1. Use of Proceeds. Proceeds of the Term Loan up to the
---------------
principal amount of the Original Term Loan outstanding immediately prior to the
New Closing Date shall be applied to finance and increase the Original Term
Loan. Proceeds of the initial Revolving Advance on the New Closing Date (which
shall not exceed the sum of (x) the amount of the Original Revolving Loan
outstanding immediately prior to the New Closing Date, plus (y) $3,000,000) up
to the amount of the Original Revolving Loan outstanding immediately prior to
the New Closing Date shall be applied to finance the Original Revolving Loan.
Proceeds of (i) the Term Loan in excess of the principal of the Original Term
Loan, and (ii) the initial Revolving Advance in excess of the principal of the
Original Revolving Loan, shall be applied by the Borrower towards (and, together
with the proceeds of the Guaranteed Loan and the equity issuance referred to in
Section 6.17 hereof, shall be sufficient to pay in full) the purchase price of
the Comcast Acquisition, non-compete payments, and the payment of all fees and
expenses relating to the Comcast Acquisition and the financing thereof incurred
through the New Closing Date (whether or not such fees and expenses shall have
been billed as of the New Closing Date), which fees and expenses shall not
exceed $3,000,000. Proceeds of subsequent Revolving Advances shall be used for
general corporate needs of the Borrower, including, without limitation, for fees
and expenses with respect to the Takeout Financing, a Special Subordinated
Takeout Financing or an Initial Equity Issuance (which fees and expenses shall
be reasonably satisfactory to the Agent).
SECTION 9. AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that, so long as any Advance
or any Letter of Credit or reimbursement obligation for a Letter of Credit is
outstanding or any Lender has any Commitment hereunder (assuming that the
Comcast Acquisition, if it becomes effective, and the making of the Loans by the
Lenders, if made, occur simultaneously on the New Closing Date), unless
specifically waived by the Majority Lenders in writing:
(S) 9.1. Financial Statements and Other Information. The Borrower
------------------------------------------
shall furnish or cause to be furnished to the Agent and each Lender:
(a) as soon as practicable and in any event within forty-five days
after the close of each of the first three quarters of each Fiscal Year of the
Borrower, a combined and combining:
(i) balance sheet of the Borrower and its Subsidiaries;
(ii) statement of income of the Borrower and its Subsidiaries;
and
(iii) statement of cash flows of the Borrower and its
Subsidiaries,
in each case, as at the end of and for the period commencing at the end of the
previous Fiscal Year and ending with such quarter just closed and for the period
commencing at the end of the previous quarter and ending with such quarter just
closed, setting forth for each such period in comparative form (x) the
corresponding figures for the applicable quarter and year to date of the
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preceding Fiscal Year, and (y) the forecasts of the Borrower and its
Subsidiaries for such quarter and year to date previously delivered under
Section 9.1(k) hereof, all in reasonable detail and certified by the chief
executive or financial officer of the Borrower to have been prepared in
accordance with GAAP, subject to normal recurring year-end audit adjustments,
together with (A) a schedule in form satisfactory to the Agent setting forth the
Borrower's EBITDA for such quarter, actual Capital Expenditures made by the
Borrower and its Subsidiaries during such quarter and indicating that such
Capital Expenditures were made in compliance with Section 10.1 hereof; and (B) a
schedule in form satisfactory to the Agent of the computations used by the
Borrower in determining compliance with the covenants contained in subparagraphs
(b), (c) and (e) of Section 9.21 hereof;
(b) as soon as practicable and in any event within ninety days after
the close of each Fiscal Year of the Borrower:
(i) an audited combined and combining balance sheet of the
Borrower and its Subsidiaries;
(ii) an audited combined and combining statement of income of
the Borrower and its Subsidiaries; and
(iii) an audited combined and combining statement of cash flows
of the Borrower and its Subsidiaries,
in each case, as at the end of and for the Fiscal Year just closed, setting
forth in comparative form (x) the corresponding figures for the preceding Fiscal
Year, and (y) the forecasts of the Borrower and its Subsidiaries for such Fiscal
Year previously delivered under Section 9.1(k) hereof, all in reasonable detail
and (except as to forecasts and comparisons with forecasts) certified (without
any qualification or exception deemed material by the Agent) by independent
public accountants selected by the Borrower and satisfactory to the Agent; and
concurrently with such financial statements, a written statement signed by such
independent accountants (x) to the effect that, in making the examination
necessary for their certification of such financial statements, they have not
obtained any knowledge of the existence of any Default or Event of Default, or,
if such independent accountants shall have obtained from such examination any
such knowledge, they shall disclose in such written statement the Default or
Event of Default and the nature thereof, it being understood that such
independent accountants shall be under no liability, directly, or indirectly, to
anyone for failure to obtain knowledge of any such Default or Event of Default,
and (y) setting forth calculations of the Borrower as specifically reviewed by
such auditors as to the compliance by the Borrower with all the covenants
contained in Section 9.21 and Section 10.1 hereof;
(c) as soon as practicable and in any event within thirty days after
the close of each calendar month (other than any calendar month at the end of
which a fiscal quarter or Fiscal Year ends), a combined and combining:
(i) balance sheet of the Borrower and its Subsidiaries;
(ii) statement of income of the Borrower and its Subsidiaries;
and
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(iii) a statement of cash flows of the Borrower and its
Subsidiaries at the end of and for the period commencing at the end of the
previous Fiscal Year and ending with such month just closed and for the
period commencing at the end of the previous month and ending with such
month just closed,
in each case prepared by Muzak Management of the Borrower, setting forth in
comparative form (x) the corresponding figures for the appropriate month and
year to date of the previous Fiscal Year and (y) the forecasts of the Borrower
and its Subsidiaries for such month and year to date previously delivered under
Section 9.1(k) hereof, all in reasonable detail (including, without limitation,
stating the amount of Interest Expense on each of the Term Loan, Revolving Loan,
the Letters of Credit, the Guaranteed Loan and all other Indebtedness for
Borrowed Money of the Borrower and its Subsidiaries for such calendar month and
the depreciation and amortization and the rental expense of the Borrower and its
Subsidiaries for such calendar month) and certified by the chief executive or
financial officer of the Borrower to have been prepared in accordance with GAAP,
subject to normal year-end adjustments;
(d) promptly, and in any event within 15 days of receipt thereof,
copies of all financial reports (including, without limitation, management
letters), if any, submitted to the Borrower or any of its Subsidiaries by its
auditors, in connection with each annual or interim audit or review of its books
by such auditors;
(e) promptly, and in any event within five days of the issuance
thereof, copies of all reports, if any, to or other documents filed by the
Borrower or any of its Subsidiaries with the Securities and Exchange Commission
under the Securities Act of 1933 or the Securities Exchange Act of 1934 (other
than on Form S-8 or 8-A or similar forms), and all reports, notices or
statements sent or received by the Borrower or any of its Subsidiaries to or
from the holders of any equity interests of the Borrower or any such Subsidiary
(in their capacity as such) or of any Indebtedness for Borrowed Money (other
than Capital Leases permitted hereunder) of the Borrower or any such Subsidiary
in excess of $100,000 or to or from the trustee under any indenture under which
the same is issued;
(f) concurrently with the delivery of the financial statements
required to be furnished by Section 9.1(a) or Section 9.1(b) hereof, a
certificate signed by the chief executive or financial officer of the Borrower,
(x) stating that a review of the activities of the Borrower and its Subsidiaries
during such fiscal quarter or Fiscal Year, as the case may be, has been made
under his immediate supervision with a view to determining whether the Borrower
and its Subsidiaries has observed, performed and fulfilled all of its respective
obligations under each Loan Document to which it is a party, and (y)
demonstrating, in a format satisfactory to the Agent, the compliance by the
Borrower and its Subsidiaries with the covenants contained in Sections 9.21,
10.1, 10.3, 10.4 and 10.6 hereof and stating that there existed during such
fiscal quarter or Fiscal Year no Default, or Event of Default or if any such
Default or Event of Default existed, specifying the nature thereof, the period
of existence thereof and what action the Borrower or its Subsidiary proposes to
take, or has taken, with respect thereto;
(g) promptly upon the occurrence of any Event of Default, and in any
event within five days thereof, a certificate signed by the chief executive or
financial officer of the
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Borrower, specifying the nature thereof and the action the Borrower or its
Subsidiary proposes to take or has taken with respect thereto;
(h) promptly, and in any event within five days of the commencement
thereof, Written Notice of any litigation, including arbitrations, and of any
proceedings before any Governmental Body which would, if successful, cause a
Material Adverse Effect or where the amount involved exceeds $250,000;
(i) promptly, and in any event within 15 days thereof, such other
information respecting the business, operations and financial condition of the
Borrower or any of its Subsidiaries as any Lender may from time to time
reasonably request;
(j) not later than twenty Business Days after the end of each month,
a certificate dated the last day of such month just ended from the Borrower, in
each case substantially in the form of Exhibit 9.1(j) hereto and signed by the
chief executive officer or chief financial officer of the Borrower (each such
certificate, a "BORROWING BASE CERTIFICATE");
(k) (i) not later than thirty days prior to the commencement of each
Fiscal Year of the Borrower beginning with the Fiscal Year commencing on January
1, 1993, a two Fiscal-Year forecast of the financial condition and results of
operations of the Borrower and its Subsidiaries for such two Fiscal Years
(covering in any event annual balance sheets, statements of cash flow and of
income); and (ii) not later than thirty days prior to the commencement of each
Fiscal Year of the Borrower, an annual plan for the Borrower and its
Subsidiaries for the immediately succeeding Fiscal Year, indicating balance
sheet and statements of cash flow and income on a monthly basis; in all
instances, in form, scope and substance reasonably satisfactory to the Agent;
(l) promptly, and in any event within five days thereof, notice:
(i) of receipt by a Credit Party or any Subsidiary thereof, or
any tenant or other occupant of any property owned, operated, leased or
occupied by a Credit Party or Subsidiary thereof, of any claim, complaint,
charge or notice of a violation or potential violation of any Environmental
Law;
(ii) of the occurrence of a spill or other Release of a
Hazardous Material upon, under or about or affecting any of the properties
owned, operated, leased or occupied by a Credit Party or Subsidiary
thereof, or Hazardous Materials at levels or in amounts that may have to be
reported, remedied or responded to under any Environmental Law are detected
on or in the soil or groundwater;
(iii) that a Credit Party or Subsidiary thereof is or may be
liable for any costs of cleaning up or otherwise responding to a Release of
Hazardous Materials;
(iv) that any part of the properties owned, operated, leased or
occupied by a Credit Party or any Subsidiary thereof is or may be subject
to a Lien under any Environmental Law;
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(v) that a Credit Party or Subsidiary will undertake or has
undertaken any cleanup or other response action with respect to any
Hazardous Material;
(vi) that MLP Communications Company (or the Borrower or any
other FCC Affiliate of the Borrower) has received notice from a
Governmental Body that it is at risk of loss or has lost use or possession
of an FCC License; and
(vii) that the Borrower has lost, or is aware of any threatened
loss, of the use of Channel Capacity under any of the agreements entered
into, from time to time, by the Borrower or any of its FCC Affiliates with
any Channel Capacity Providers (including, without limitation, MicroSpace)
other than losses in the ordinary course of business and which losses in
the aggregate could have a Material Adverse Effect.
(m) not later than 10 days after entering into such agreement or
agreements, copies of all new Executive Agreements;
(n) promptly upon occurrence thereof, and in any event within 10 days
thereof, notice of any change in the ownership interests of the Borrower; and
(o) not later than the earlier of (i) 90 days after the end of each
Fiscal Year of the Borrower, commencing with the Fiscal Year ending on December
31, 1992, and (ii) the date, if any, that the Borrower makes any mandatory
prepayment on any of the Loans pursuant to Section 3.1(b) hereof, a calculation
of Excess Cash Flow, in such detail and form as the Agent may reasonably
request.
(S) 9.2. Taxes and Claims. The Borrower shall, and shall cause each
----------------
of its Subsidiaries, to, pay and discharge when due (except to the extent that
(i) any such taxes, assessments, governmental charges or claims are diligently
contested in good faith by appropriate proceedings and proper reserves are
established on the books of the Borrower or such Subsidiary, and (ii) any Liens
arising from the non-payment thereof when due will not attach to any of the
Collateral in a manner which would have priority over the Lien of the Agent
thereon or risk the sale of or foreclosure on such Collateral) (a) all taxes,
assessments and governmental charges upon or against it or its properties or
assets prior to the date on which penalties attach thereto and (b) all lawful
claims, whether for labor, materials, supplies, services or anything else, which
might or could, if unpaid, become a Lien or charge upon its properties or
assets.
(S) 9.3. Insurance. (a) The Borrower shall, and shall cause each of
---------
its Subsidiaries to, (i) keep all its properties adequately insured at all times
with responsible insurance carriers, in amounts and pursuant to insurance
policies reasonably acceptable to the Agent, against loss or damage by fire and
other hazards as well as business interruption insurance; (ii) maintain adequate
insurance at all times with responsible insurance carriers, in amounts and
pursuant to insurance policies reasonably acceptable to the Agent, against
liability on account of damage to Persons and property and under all applicable
workers' compensation laws; and (iii) maintain adequate insurance covering such
other risks as the Agent may reasonably request. For purposes of complying with
this Section 9.3(a), adequate insurance shall in any event prevent the Borrower
and its Subsidiaries from becoming a co-insurer (excluding any deductibles
thereunder reasonably acceptable to the Agent).
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(b) All insurance covering tangible property subject to a Lien in
favor of the Agent granted pursuant to this Agreement or under any Security
Document or other instrument or document given as security pursuant hereto shall
provide that the full amount of proceeds with respect thereto shall be payable
to the Agent as mortgagee, secured party or otherwise as its interests may
appear (which right of payment shall be subject to the provisions of Section 3.2
hereof and which the Agent otherwise may waive by Written Notice in accordance
with the terms of Section 3.1 hereof) and shall further provide (i) for at least
30 days' prior written notice to the Agent of the cancellation or substantial
modification thereof, (ii) that, in respect of the interests of the Borrower,
any of its Subsidiaries and the Agent in such insurance, such insurance shall
not be invalidated by any action or inaction of the Borrower, any such
Subsidiary or any other Person, (iii) insure the Agent's interests regardless of
any breach of or violation by the Borrower and any of its Subsidiaries or any
other Person of any warranties, declarations or conditions contained in such
insurance, and (iv) provide that the Agent or the Lenders shall have the right
(but not the obligation) to cure any default by the Borrower or any of its
Subsidiaries under such insurance.
(c) The Borrower shall maintain key man life insurance policies with
responsible insurance carriers and pursuant to insurance policies reasonably
acceptable to the Agent, covering Mr. John Jester, in an amount of not less than
$2,000,000 of which at least the initial $2,000,000 of coverage available under
such policy shall name the Agent as beneficiary thereunder and shall be duly
assigned in accordance with the provisions of Section 5.3 hereof.
(d) Except as otherwise agreed in writing by the Agent, each
liability policy and each hazard policy on Collateral required pursuant to this
Section 9.3 shall name the Agent as additional insured or first loss payee, as
appropriate, and shall be primary without right of contribution from any other
insurance which is carried by the Lenders or the Agent to the extent that such
other insurance provides it with contingent and/or excess liability insurance
with respect to its interest as such in the Collateral and shall expressly
provide that all of the provisions thereof, except the limits of liability
(which shall be applicable to all insureds as a group) and except liability for
premiums (which shall be solely a liability of the Borrower or its Subsidiaries,
as the case may be), shall operate in the same manner as if there were a
separate policy covering each insured.
(e) The property insurance required by this Agreement may, at the
option of the Agent, be effected by blanket and/or umbrella policies issued to
the Borrower covering the Real Estate as well as other properties (real and
personal) which are owned or leased by the Borrower and its Subsidiaries,
provided, that, in each case, the policies otherwise comply with the provisions
of this Agreement and allocate to the Real Estate, from time to time, the
coverage specified by the Agent, without possibility of reduction or coinsurance
by reason of, or damage to, any other property (real or personal) named therein.
If the insurance required by this Agreement shall be effected by any such
blanket or umbrella policies, the Borrower shall furnish to the Agent original
policies or certified copies of such originals, with schedules attached thereto
showing the amount of the insurance provided under such policies which is
applicable to the Real Estate.
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(f) The Borrower shall, and shall cause each of its Subsidiaries to,
from time to time upon request of the Agent, promptly furnish or cause to be
furnished to the Agent evidence, in form and substance reasonably satisfactory
to the Agent, of the maintenance of all insurance required to be maintained by
this Section 9.3, including, but not limited to, such originals or copies as the
Agent may request of policies, certificates of insurance, riders and
endorsements relating to such insurance and proof of premium payments.
(S) 9.4. Books and Reserves. The Borrower shall and shall cause each
------------------
of its Subsidiaries, to (a) maintain, at all times, true and complete books,
records and accounts in which true and correct entries shall be made of its
transactions in accordance with GAAP; and (b) by means of appropriate entries,
reflect in its accounts and in all financial statements furnished pursuant to
Section 9.1 proper liabilities and reserves for all taxes and proper provision
for depreciation and amortization of its properties and bad debts, all in
accordance with GAAP.
(S) 9.5. Properties in Good Condition. The Borrower shall keep, and
----------------------------
shall cause each of its Subsidiaries to keep, its properties in good repair,
working order and condition, ordinary wear and tear excepted, in accordance with
prudent operating procedures relating thereto and, from time to time, make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto, so that the business carried on may be properly and advantageously
conducted at all times in accordance with prudent business management.
(S) 9.6. Maintenance of Existence. The Borrower shall preserve and
------------------------
maintain, and cause each of its Subsidiaries, to preserve and maintain, its
statutory existence, rights, franchises and licenses; provided, however, the
Borrower may convert from a limited partnership into a newly formed domestic
corporation that succeeds to all assets, rights and liabilities of the Borrower
(and no others) on a basis satisfactory to the Lender (the "SUCCESSOR
CORPORATION") so long as prior to the effectuation of such conversion, the
Lenders (as confirmed in writing to the Borrower): (A) are satisfied, in their
sole and absolute discretion, that (i) the Successor Corporation shall be bound
in full to all of the Obligations set forth in the Loan Documents as if it were
the Borrower, including, without limitation, the obligation to pay the Lender
Debt at the times and in the manner set forth herein, and (ii) the interests
granted to the Agent under the Security Documents shall remain in full force and
effect (including, without limitation, without additional risks with respect to
assertions of preference, priority or fraudulent conveyance claims by any
Person); and (B) shall have received, (i) the corporate documentation and
proceedings of the Successor Corporation, (iii) amendments to the Loan Documents
(including, without limitation, Sections 9, 10, 11 and 12 of this Agreement) to
reflect to conversion of the Borrower into the Successor Corporation, and (iii)
such other documentation and opinions of counsel, as requested by the Lenders
with respect to such matters, each in form and substance satisfactory to the
Majority Lenders in their sole and absolute discretion.
(S) 9.7. FCC Compliance. (a) Subject to the overall direction,
--------------
supervision and control of MLP Communications Company pursuant to the FCC
Leases, the Borrower shall, on behalf of MLP Communications Company, maintain in
good working order in accordance with normal operating practices all of the
personal property which transmits or receives radio frequency energy or waves
and in accordance with all applicable Governmental Rules, including, without
limitation, the Communications Act and the FCC Rules, all in a manner such that
there shall be no Material Adverse Effect, taken in the aggregate. Upon the
Agent's request therefor,
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the Borrower shall deliver to the Agent copies of certificates, if any, issued
by the FCC to MLP Communications Company or to the Borrower and/or any other
documents as the Agent may request, evidencing MLP Communications Company's
compliance (or, as the case may be, the Borrower's compliance) with the
Communications Act and the FCC Rules.
(b) The Borrower shall promptly notify the Agent if MLP
Communications Company or the Borrower receives written notice of: (i) any
action by or pending before the FCC to revoke, cancel, rescind, or to fail to
renew, or materially modify any Governmental Permits issued by the FCC to the
Borrower, or to any of its FCC Affiliates, to any of the Channel Capacity
Providers (including, without limitation, MicroSpace); or (ii) any FCC order to
show cause, notice of apparent liability for forfeiture, any order of
forfeiture, any complaint against the Borrower or any of its FCC Affiliates
filed with the FCC, or any written threat thereof. Unless the Borrower receives
the prior written consent of the Majority Lenders to the contrary (which consent
shall not be unreasonably withheld), the Borrower shall use its best efforts to
timely protest or seek rescission or withdrawal, in good faith, of any such
action, order, notice or complaint relating to any Governmental Permit issued to
the Borrower or any of its FCC Affiliates by the FCC to the extent that the loss
of such Governmental Permit or Governmental Permits could result in a Material
Adverse Effect. If any of the MAS microwave stations or other stations licensed
or to be licensed in the future by the FCC to the Borrower or to any of its FCC
Affiliates are operating in a manner that violates any FCC Rules or the
Communications Act, the Borrower shall use its best efforts to bring the
operation of such stations into compliance with FCC Rules and, as the case may
be, the Communications Act, as expeditiously as possible, to the extent that the
loss of use of such stations could result in a Material Adverse Effect.
(c) The Borrower shall promptly notify the Agent if the Borrower
receives notice: (i) that Channel Capacity Providers (that provide services
that are material in the aggregate to the Borrower) operate FCC-licensed or
authorized stations not in conformity with the Communications Act and the FCC
Rules; (ii) of the assignment of license or transfer of control, and of any
proposed assignment of license or proposed transfer of control, of any of the
licenses or Governmental Permits of any of the Channel Capacity Providers (that
provide services that are material in the aggregate to the Borrower); (iii) of
any investigation, notice of violation, order or complaint issued by or before
any Governmental Body, including the FCC, with respect to Channel Capacity
Providers (that provide services that are material in the aggregate to the
Borrower); and (iv) of any other proceedings that, taken as a whole, could
materially adversely affect the validity or the continued effectiveness of the
Borrower to broadcast utilizing FCC-issued station licenses held by Channel
Capacity Providers or the leases of MicroSpace for satellite transponder
capacity or the leases for satellite transponder capacity of any other parties
that may in the future provide Channel Capacity via communications satellite
transponders to the Borrower or to any of its FCC Affiliates.
(d) The Borrower shall promptly notify the Agent of any proposed
acquisition, and of any actual acquisition, by the Borrower or by any of its FCC
Affiliates (including, without limitation, MLP Communications Company) of any
FCC Licenses not listed on Schedule 1-b attached hereto. Without limiting the
generality of the foregoing, the Borrower shall promptly transmit to the Agent
true and correct copies of any and all applications tendered for filing by or on
behalf of the Borrower or any of its FCC Affiliates (including, without
limitation, MLP
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Communications Company) seeking any such FCC License, or seeking modification of
any of the FCC Licenses, or seeking FCC consent to the acquisition by the
Borrower or any of its FCC Affiliates of any FCC Licenses or any interests in
any holder of any such license. The Borrower shall cause any and all FCC
Licenses acquired by the Borrower or any of its FCC Affiliates to be held by MLP
Communications Company and not by the Borrower or any of its other FCC
Affiliates. The Borrower and MLP Communications Company shall enter into FCC
Leases with respect to the channel capacity of each station which is the subject
of each of such additional FCC Licenses, substantially in the form attached
hereto as Exhibit 1-i. Such additional FCC Leases shall be entered into by MLP
Communications Company and the Borrower as expeditiously as possible following
the acquisition by MLP Communications Company of any additional FCC Licenses,
and, promptly upon execution of any such additional FCC Leases, true and correct
copies of any and all such additional FCC Licenses and of any and all such
additional FCC Leases shall be submitted by the Borrower to the Agent.
(S) 9.8. Inspection by the Agent and the Lenders. The Borrower shall
---------------------------------------
allow, and shall cause each of its Subsidiaries, to allow, any representative of
any Lender or of the Agent, at such Lender's or the Agent's expense, as the case
may be, to visit and inspect any of its properties, to examine its books of
account and other records and files, to make copies thereof and to discuss its
affairs, business, finances and accounts with its officers and employees and
independent accountants (and the Borrower hereby irrevocably authorizes its
independent accountants to discuss with the Agent and the Lenders the financial
affairs of the Borrower and its Subsidiaries), all at such reasonable times
during normal business hours and upon reasonable notice, up to twice in each
Fiscal Year (or, during the continuance of a Default or Event of Default, at
such times, as often as the Lenders or the Agent may request and without
notice).
(S) 9.9. Pay Indebtedness to Lenders and Perform Other Covenants.
-------------------------------------------------------
The Borrower shall (a) make full and timely payment of all payments required to
be made by the Borrower in respect of the Lender Debt, including without
limitation, the Term Loan and the Revolving Loan, whether now existing or
hereafter arising, (b) subject to the provisions of Section 10.6(b)(iii) hereof,
make full and timely payment of all payments required to be made by the Borrower
in respect of the Guaranteed Loan, whether now existing or hereafter arising,
(c) strictly comply, and cause each of its Subsidiaries, to strictly comply,
with all the terms and covenants contained in each Loan Document to which it is
a party, all at the times and places and in the manner set forth therein, and
(d) except for the filing of continuation statements and the making of other
filings by the Agent as secured party or assignee, at all times take all action
necessary to maintain the Liens provided for under or pursuant to this Agreement
or any Security Document as valid and perfected Liens on the property intended
to be covered thereby (subject to no other Liens except Permitted Liens) and
supply all information to the Agent or the Lenders necessary for such
maintenance.
(S) 9.10. Notice of Default. The Borrower shall promptly, and cause
-----------------
each of its Subsidiaries, to promptly (and in any event within five days) notify
the Agent in writing of any Default or Event of Default, or a mature event of
default under any other agreement in respect of Indebtedness for Borrowed Money
in excess of $100,000 to which the Borrower or any of its Subsidiaries is a
party, in each case describing the nature thereof and the action the Borrower
proposes to take with respect thereto.
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(S) 9.11. Reporting of Misrepresentations. In the event that the
-------------------------------
Borrower or any Subsidiary of the Borrower discovers that any representation or
warranty made in any Loan Document by any Credit Party was incorrect in any
material respect when made, the Borrower shall promptly report, or shall cause
such Subsidiary promptly to report, the same to the Agent and take, or cause to
be taken, all available steps to correct such misrepresentation or breach of
warranty.
(S) 9.12. Compliance with Laws. The Borrower shall comply, and shall
--------------------
cause each of its Subsidiaries, to comply, in all material respects, with all
applicable laws, rules, regulations and orders, and the Borrower shall duly
observe, and cause each of its Subsidiaries to duly observe, in all material
respects, all valid requirements of applicable governmental authorities and all
applicable statutes, rules and regulations, including, without limitation, all
applicable statutes, rules and regulations relating to public and employee
health and safety, provided, that, the Borrower shall not be deemed to be in
default in the requirements of this Section 9.12 due to the failure of the
Borrower and its Subsidiaries to comply with all applicable franchise statutes,
rules and regulations of jurisdictions other than the United States and Canada
(and their respective states and provinces) governing the relationship between
the Borrower, in its capacity as a franchisor, and the Borrower's franchisees
(and potential franchisees), to the extent, and only to the extent, that such
non-compliance would not have a Material Adverse Effect; and provided, further,
the Borrower shall not be deemed to be in default in the requirements of this
Section 9.12 due to the existence of the matters described on Schedule 12.16
hereto to the extent, and only to the extent, that the Borrower is using its
best efforts and diligently taking appropriate actions to promptly cure the
matters disclosed on such Schedule.
(S) 9.13. ERISA. (a) The Borrower shall pay and discharge, and
-----
shall cause each Credit Party and each ERISA Affiliate to pay and discharge,
when due, any liability imposed upon it pursuant to the provisions of Title IV
of ERISA.
(b) The Borrower shall deliver to the Agent promptly, and in any
event within ten days (unless otherwise specified below), after
(i) the Borrower knows, or has reason to know, of the occurrence
of any Reportable Event with respect to any Pension Benefit Plan which is
subject to Title IV of ERISA, a copy of the materials that are filed by the
applicable plan administrator with the PBGC provided that a copy of such
materials shall not be furnished to the Agent until ten days after receipt
of a copy of such materials by the Borrower;
(ii) the receipt of notice by any Credit Party or an ERISA
Affiliate or any administrator of any Pension Benefit Plan which is
maintained by any Credit Party or any ERISA Affiliate that has been given
to participants, beneficiaries or filed with the PBGC a notice of intent to
terminate any Pension Benefit Plan under Section 4041(c) of ERISA, a copy
of any such notice;
(iii) the receipt of notice by any Credit Party or any ERISA
Affiliate or any administrator of any Pension Benefit Plan which is
maintained by any Credit Party or any ERISA Affiliate from the PBGC of the
PBGC's intention to terminate any Pension
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Benefit Plan or to appoint a trustee to administer any Pension Benefit Plan
under Section 4042 of ERISA, a copy of such notice;
(iv) the filing thereof with the Internal Revenue Service,
copies of each annual report that is filed on Treasury Form 5500 with
respect to any Pension Benefit Plan subject to Title IV of ERISA which is
maintained by any Credit Party, together with any actuarial statements on
Schedule B to such Form 5500;
(v) any Credit Party knows or has reason to know of any event or
condition which might constitute grounds under the provisions of Section
4042 of ERISA for the termination of (or the appointment of a trustee to
administer) any Pension Benefit Plan, an explanation of such event or
condition;
(vi) the receipt by any Credit Party of an assessment of
withdrawal liability under Section 4201 of ERISA from a Multiemployer Plan,
a copy of such assessment;
(vii) any ERISA Affiliate has actual knowledge of the
termination or insolvency (under Sections 4241 or 4245 of ERISA) of any
Multiemployer Plan to which any Credit Party or any ERISA Affiliate
contributes, notice of such event within 30 days of acquiring such
knowledge;
(viii) (i) due inquiry, the Borrower has knowledge that as of
the last day in any calendar year, the Liabilities of all Underfunded
Pension Benefit Plans that are maintained by the ERISA Affiliates exceeds
$1,000,000; or (ii) any ERISA Affiliate purchases an entity (which itself
would, upon the purchase, be deemed an ERISA Affiliate) that maintains an
Underfunded Pension Benefit Plan: (A) notice from the Borrower of such
underfunding or purchase; (B) a copy of the latest annual report that is
filed on Treasury Form 5500 with respect to any Underfunded Pension Benefit
Plan, together with any actuarial statements on Schedule B to such form;
and (C) any other information as Agent may reasonably request with respect
to any Underfunded Pension Benefit Plan and/or with respect to any ERISA
Affiliate maintaining or contributing to such Plan. As used herein, the
term "Underfunded Pension Benefit Plan" shall mean a Pension Benefit Plan
subject to Title IV of ERISA that has Liabilities. As used herein, the
term "Liabilities" shall mean the liabilities as shown on Schedule B of the
latest Form 5500 filed with respect to each Underfunded Pension Benefit
Plan determined as of the latest actuarial valuation date of such Plan and
calculated in accordance with the actuarial assumptions and methods used by
such Plan for purposes of Sections 4041(c), 4062, 4063 or 4064 of ERISA, or
if such calculation is not available (without imposing an obligation on the
ERISA Affiliate to cause such a calculation to be conducted), determined as
of the latest actuarial valuation date of such Plan and calculated in
accordance with the actuarial assumptions and methods used by such Plan for
purposes of Section 412 of the Code and determined net of the fair market
value of the assets of such Plan as shown on the latest Form 5550 with
respect to such Plan;
(ix)(i) the receipt by any ERISA Affiliate of an assessment of
withdrawal liability under Section 4201 of ERISA from a Multiemployer Plan
which, when combined
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with all other preexisting assessments of withdrawal liability under
Section 4201 of ERISA received by all other ERISA Affiliates, and
determined after giving effect to any payments theretofore made by such
ERISA Affiliates and all reductions to such preexisting assessments made by
such Multiemployer Plans, or by arbitrators, federal courts or by operation
of law, exceeds $1,000,000; or (ii) any ERISA Affiliate purchases an entity
(which itself would, upon the purchase, be deemed an ERISA Affiliate) which
has a potential withdrawal liability in excess of $1,000,000, to the extent
that the Borrower has actual knowledge thereof: (A) a copy of such
assessment, together with any other information as Agent may reasonably
request with respect to such assessment and/or with respect to any ERISA
Affiliate contributing to such Multiemployer Plan, and (B) notice from the
Borrower of such purchase; or
(x) any Credit Party knows or has reason to know that an
application has been made to the Secretary of the Treasury for a waiver of
the minimum funding standard under the provisions of Section 412 of the
Code with respect to any Pension Benefit Plan, a copy of such application;
and
in each case described above, together with a statement signed by an appropriate
officer of the applicable Credit Party or ERISA Affiliate setting forth details
as to such Reportable Event, notice event or condition and the action that will
be taken with respect thereto, if any such action is required.
(S) 9.14. Further Assurances. The Borrower shall, and shall cause
------------------
each of its Subsidiaries, to, at its cost and expense, upon request of the
Agent, duly execute and deliver, or cause to be duly executed and delivered, to
the Agent such further instruments and do and cause to be done such further acts
as may be necessary or proper in the reasonable opinion of the Agent to carry
out more effectually the provisions and purposes of this Agreement or any other
Loan Document.
(S) 9.15. Audits. (a) The Borrower shall, at its expense and upon
------
the request of the Agent, cause its auditors to perform an annual audit, in form
and substance satisfactory to the Agent, of the Inventory and Receivables of the
Borrower and its Subsidiaries and shall deliver to the Agent promptly, and in
any event within twenty days after the same becomes available, the results of
such audit;
(b) In addition to audits referred to in paragraph (a) of this
Section 9.15, the Borrower shall allow, and shall cause each of its Subsidiaries
to allow, the Agent or its designee to perform such audits of the Borrower and
its Subsidiaries, as the Agent may request, which audits shall be at the
Lenders' expense, except for audits under this paragraph (b) conducted while a
Default is continuing, in which case the costs and expenses of such audits shall
be at the expense of the Borrower.
(S) 9.16. Environmental Matters. (a) The Borrower shall, and shall
---------------------
cause each of its Subsidiaries, to, comply in all material respects with the
provisions of all Environmental Laws and all applicable Federal, state and local
occupational health, safety and sanitation laws, ordinances, codes, rules and
regulations, permits, licenses and interpretations and orders of regulatory and
administrative authorities with respect thereto, and shall keep its properties
and
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the properties of its Subsidiaries free of any Lien imposed pursuant to any
Environmental Law. The Borrower shall not cause or suffer or permit, and shall
not suffer or permit any of its Subsidiaries, to cause or suffer or permit, the
property of the Borrower or such Subsidiary, to be used for the generation,
production, processing, handling, storage, transporting or disposal of any waste
or discarded material or any Hazardous Material except Hazardous Materials used
in the ordinary course of business of the Borrower and disclosed on Schedule
9.16, in which case such Hazardous Materials shall be used, stored, generated,
treated and disposed of only in material compliance with Environmental Law, and
except the removal or the taking of remedial action in response to Hazardous
Materials on or about the properties owned, operated, leased or occupied by the
Borrower or any of its Subsidiaries.
(b) The Borrower shall supply to the Agent copies of all submissions
by the Borrower or any of its Subsidiaries to any Governmental Body and of the
reports of all environmental audits and of all other environmental tests,
studies or assessments (including the data derived from any sampling or survey
of asbestos, soil, or subsurface or other materials or conditions) that may be
conducted or performed (by or on behalf of the Borrower or any of its
Subsidiaries) on or regarding the properties owned, operated, leased or occupied
the Borrower or any of its Subsidiaries or regarding any conditions that might
have been affected by Hazardous Materials on or Released or removed from such
properties. The Borrower shall also permit and authorize, and shall cause its
Subsidiaries to permit and authorize, the consultants, attorneys or other
persons that prepare such submissions or reports or perform such audits, tests,
studies or assessments to discuss non-privileged portions of such submissions or
reports with the Agent and the Lenders.
(c) The Borrower shall promptly (and in no event more than two
Business Days after the Borrower becomes aware or otherwise informed of such
event) provide oral and Written Notice to the Agent upon the happening of any of
the following:
(i) the Borrower, any of its Subsidiaries, or any tenant or
other occupant of any property of the Borrower or any Subsidiary thereof
receives actual notice of any claim, complaint, charge or notice of a
violation or potential violation of any Environmental Law;
(ii) there has been a spill or other Release of Hazardous
Materials upon, under or about or affecting any of the properties owned,
operated, leased or occupied by the Borrower or any Subsidiary thereof, or
Hazardous Materials at levels or in amounts that may have to be reported,
remedied or responded to under Environmental Law are detected on or in the
soil or groundwater;
(iii) the Borrower or any Subsidiary thereof is or may be liable
for any costs of cleaning up or otherwise responding to a Release of
Hazardous Materials;
(iv) any part of the properties owned, operated, leased or
occupied by the Borrower or any Subsidiary thereof is or may be subject to
a Lien under any Environmental Law; or
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(v) the Borrower or any Subsidiary thereof undertakes any
cleanup or other response action with respect to any Hazardous Materials.
(d) The Borrower shall timely undertake and complete any cleanup or
other response actions required by any Environmental Law.
(e) Without in any way limiting the scope of Section 2.15 and in
addition to any obligations thereunder, the Borrower hereby indemnifies and
agrees to hold the Agent and the Lenders harmless from and against any
liability, loss, damage, suit, action or proceeding arising out of its business
or the business of its Subsidiaries pertaining to Hazardous Materials,
including, but not limited to, claims of any Governmental Body or any third
person arising under any Environmental Law or under tort, contract or common
law. To the extent laws of the United States or any applicable state or local
law in which property owned, operated, leased or occupied by the Borrower or any
of its Subsidiaries is located provide that a Lien upon such property of the
Borrower or any of its Subsidiaries may be obtained for the removal of Hazardous
Materials which have been or may be Released, no later than sixty days after
notice is given by the Agent to the Borrower, the Borrower shall deliver to the
Agent a report issued by a qualified third party engineer certifying as to the
existence of any Hazardous Materials located upon or beneath the specified
property. To the extent any Hazardous Materials located therein or thereunder
either (i) subject the property to Lien or (ii) require removal to safeguard the
health of any persons, the removal thereof shall be an affirmative covenant of
the Borrower hereunder.
(S) 9.17. Subsidiaries. The Borrower shall not own any Subsidiaries
------------
unless the Borrower shall have obtained the prior written consent of the Agent
and the Majority Lenders in accordance with the provisions of Section 10.7
hereof.
(S) 9.18. Excess Balances. In the event that, at the opening of
---------------
business on any Business Day which is the last Business Day of any calendar
month, the aggregate of all collected and available cash balances in all bank
accounts maintained by the Borrower or any Subsidiary in banks other than UBS
(the "AGGREGATE NON-UBS CASH BALANCE") exceeds $1,000,000, the Borrower shall
cause such excess over $1,000,000 to be deposited in an account maintained by
the Borrower with UBS (the "UBS ACCOUNT") and hereby pledges to the Agent for
the benefit of the Agent and the Lenders as collateral security for the prompt
payment and performance in full of all Lender Debt, all amounts now or hereafter
in the UBS Account and all present and future claims of the Borrower in respect
of the UBS Account. If at any time, the Borrower's Aggregate Non-UBS Cash
Balance without regard to amounts held in the UBS Account is less than
$1,000,000, then the Borrower shall be entitled to withdraw or issue checks or
other instruments against the UBS Account up to an amount such that the
Aggregate Non-UBS Cash Balance (after crediting such withdrawals and checks)
shall not, at any time, exceed $1,000,000. Any withdrawal or issuance by the
Borrower from the UBS Account shall constitute a certification by the Borrower
to UBS that such withdrawal or issuance is permitted under this Section 9.18.
(S) 9.19. Net Proceeds from a Takeout Financing, Special Subordinated
-----------------------------------------------------------
Takeout Financing or Initial Equity Issuance. The Borrower shall instruct any
- --------------------------------------------
Person who would disburse the Net Proceeds from a Takeout Financing, Special
Subordinated Takeout Financing or Initial Equity Issuance to deposit such Net
Proceeds into the UBS Account. In the event that,
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notwithstanding such instructions, the Borrower receives any of such Net
Proceeds, the Borrower shall immediately deposit the same in the UBS Account.
The Agent shall distribute the Net Proceeds from a Takeout Financing, Special
Subordinated Takeout Financing or Initial Equity Issuance actually deposited in
the UBS Account in accordance with the provisions of Section 3.1 hereof. Under
no conditions shall the Borrower be entitled to withdraw or issue checks or
other instruments against the UBS Account with respect to such Net Proceeds.
(S) 9.20. Interest Rate Protection. At any time after the Guaranteed
------------------------
Loan Maturity Date, the Borrower shall obtain from a financial institution
acceptable to the Agent, promptly upon the Agent's request, interest rate
protection (in a form and on terms acceptable to the Agent) for not less than
50% of the Term Loan then outstanding for all periods during the initial three
years of the Loans (taking into account all interest rate protection previously
obtained by the Borrower and in effect during such initial three year period).
(S) 9.21. Financial Covenants. The Borrower covenants and agrees
-------------------
that:
(a) MINIMUM NET WORTH. Net Worth of the Borrower and its
Subsidiaries, on a combined basis, shall be, as of the last day of each Fiscal
Year of the Borrower set forth below, not less than the amount set forth below
opposite such Fiscal Year:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
1994 $ 17,500,000
1995 17,500,000
1996 17,500,000
1997 17,500,000
1998 21,000,000
1999 24,000,000
</TABLE>
(b) EBITDA. The Borrower shall have, on the last day of each period
of four consecutive fiscal quarters ending on the respective dates set forth
below, EBITDA for such period of not less than the amount set forth below
opposite such date:
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<TABLE>
<CAPTION>
Period of Four Fiscal
Quarters Ending on the
Following Dates: Amount
---------------------- ------
<S> <C>
March 31, 1994 12,200,000
June 30, 1994 14,400,000
September 30, 1994 16,000,000
December 31, 1994 16,500,000
March 31, 1995 17,500,000
June 30, 1995 18,000,000
September 30, 1995 18,500,000
December 31, 1995 19,000,000
March 31, 1996 19,500,000
June 30, 1996 20,000,000
September 30, 1996 20,500,000
December 31, 1996 21,000,000
March 31, 1997 22,000,000
June 30, 1997 22,000,000
September 30, 1997 22,000,000
December 31, 1997 22,000,000
March 31, 1998 23,000,000
June 30, 1998 23,000,000
September 30, 1998 23,000,000
December 31, 1998 23,000,000
March 31, 1999 24,000,000
June 30, 1999 24,000,000
September 30, 1999 24,000,000
December 31, 1999 24,000,000
March 31, 2000 24,000,000
June 30, 2000 24,000,000
September 30, 2000 24,000,000
</TABLE>
(c) CURRENT RATIO. The Borrower shall maintain, on the last day of
each March, June, September and December of each calendar year, a ratio of (x)
Current Assets of the Borrower and its Subsidiaries, to (y) Current Liabilities
of the Borrower and its Subsidiaries of not less than 1.25:1.
(d) LEVERAGE RATIO. Leverage Ratio shall be, as of the last day of
each of the Fiscal Years of the Borrower set forth below, not more than the
ratio set forth below opposite such Fiscal Year:
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<TABLE>
<CAPTION>
Fiscal Year Ending Ratio
------------------ -----
<S> <C>
1994 3.25
1995 3.25
1996 3.00
1997 2.60
1998 2.00
1999 2.00
</TABLE>
(e) INTEREST COVERAGE RATIO. Interest Coverage Ratio shall be for
the period of four consecutive fiscal quarters ending on the last day of each
March, June, September and December of each of the Fiscal Years of the Borrower
set forth below, not less than the ratio set forth below opposite such day:
<TABLE>
<CAPTION>
Period of Four Fiscal
Quarters Ending on the
Following Dates: Ratio
---------------------- -----
<S> <C>
March 31, 1994 2.75
June 30, 1994 2.75
September 30, 1994 2.75
December 31, 1994 2.75
March 31, 1995 3.00
June 30, 1995 3.00
September 30, 1995 3.00
December 31, 1995 3.00
March 31, 1996 3.50
June 30, 1996 3.50
September 30, 1996 4.00
December 31, 1996 4.00
March 31, 1997 4.50
June 30, 1997 4.50
September 30, 1997 4.50
December 31, 1997 4.50
March 31, 1998 4.50
June 30, 1998 4.50
September 30, 1998 4.50
December 31, 1998 4.50
March 31, 1999 5.00
June 30, 1999 5.00
September 30, 1999 5.00
December 31, 1999 5.00
March 31, 2000 5.00
June 30, 2000 5.00
September 30, 2000 5.00
</TABLE>
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(f) FIXED CHARGE COVERAGE RATIO. Fixed Charge Coverage Ratio shall
be, for and as of the last day of each of the Fiscal Years of the Borrower set
forth below, not less than the amount set forth opposite such Fiscal Year:
<TABLE>
<CAPTION>
Fiscal Year Ending Ratio
------------------ -----
<S> <C>
1994 1.10
1995 1.10
1996 1.20
1997 1.25
1998 1.25
1999 1.25
</TABLE>
(S) 9.22. Access to Accountants. On or prior to the New Closing
---------------------
Date, the Borrower shall cause its independent certified public accountants to
deliver to the Agent a letter addressed to the Borrower stating that such
accountants are aware that the Agent and each Lender are relying on the
financial statements produced by such accountants for the Borrower and its
Subsidiaries for the Fiscal Year ending December 31, 1992. The Borrower shall
cause its independent certified public accountants to deliver to the Agent on an
annual basis a substantially similar reliance letter in respect of each
subsequent Fiscal Year. The Borrower authorizes the Agent and each Lender to
discuss the financial condition of the Borrower and its Subsidiaries with such
independent public accountants upon reasonable notice to such Person of its
intention to do so. The Borrower shall be given the reasonable opportunity to
participate in any such discussion. On or prior to the New Closing Date, the
Borrower shall deliver a letter to such accountants authorizing them to comply
with the provisions of this Section 9.22.
SECTION 10. NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long any Loan or any Letter
of Credit or reimbursement obligation for a Letter of Credit is outstanding or
any Lender has any Commitment hereunder (assuming that the Comcast Acquisition,
if it becomes effective, and the making of the Loans by the Lenders, if made,
occur simultaneously on the New Closing Date), the Borrower shall not, and shall
not suffer or permit any of its Subsidiaries to, without the prior written
consent of the Majority Lenders:
(S) 10.1. Capital Expenditures. (a) Make or capitalize, directly or
--------------------
indirectly, or otherwise permit Capital Expenditures of the Borrower and its
Subsidiaries to exceed, in any Fiscal Year of the Borrower, or make any
commitment for any such Capital Expenditures or costs to be paid or incurred
during any such period, in excess in the aggregate of the amount set forth below
opposite such period:
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<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
1994 7,250,000
1995 7,250,000
1996 7,250,000
1997 7,250,000
1998 7,250,000
1999 7,250,000
2000 7,250,000
</TABLE>
provided, that, the amount of permitted Capital Expenditures in any Fiscal
Year shall be increased by an amount equal to 50% of the amount of
permitted Capital Expenditures under this Section 10.1 for the immediately
prior Fiscal Year which were not expended by the Borrower and its
Subsidiaries (disregarding, in calculating the amount of permitted Capital
Expenditures for any such prior Fiscal Year, any increase in permitted
Capital Expenditures relating to such prior Fiscal Year pursuant to this
proviso).
(b) In no event shall the Borrower or any Subsidiary assume or incur
any Indebtedness in connection with the acquisition of a fixed or capital asset
(including, without limitation, under a Capitalized Lease) if the fair market
value (as determined in a manner reasonably satisfactory to the Agent) of such
asset does not exceed the aggregate principal (or notional principal, in the
case of Capitalized Lease Obligations) amount of such Indebtedness so incurred
or assumed.
(c) In no event shall the Borrower or any of its Subsidiaries enter
into a Capital Lease in any Fiscal Year of the Borrower which, together with one
or more Capital Leases, if any, entered into by the Borrower and its
Subsidiaries in such Fiscal Year, provides for aggregate payments over the terms
of such Capital Lease or Capital Leases (as such payments are required under
GAAP to be recorded on the Borrower's balance sheet) of more than $1,000,000.
(S) 10.2. Liens. Create, incur, assume or suffer to exist any Lien
-----
upon any of its property or assets of any character (including, without
limitation, the property and assets covered under the Security Documents),
whether owned at the date hereof or hereafter acquired, or hold or acquire any
property or assets of any character under conditional sales, finance lease or
other title retention agreements, other than the following (collectively,
"PERMITTED LIENS"):
(a) Liens in favor of the Agent or the Lenders pursuant to this
Agreement or the Security Documents;
(b) (i) Liens arising out of judgments or awards (other than any
judgment described in Section 11.1(j) hereof) in respect of which the Borrower
or any of its Subsidiaries shall in good faith be prosecuting an appeal or
proceedings for review and in respect of which it shall have secured a
subsisting stay of execution pending such appeal or proceedings for review,
provided it shall have set aside on its books adequate reserves, in accordance
with GAAP, with respect to such judgment or award;
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(ii) Liens for taxes, assessments or governmental charges or
levies, provided, that payment thereof shall not at the time be required in
accordance with the provisions of Section 9.2 hereof;
(iii) deposits, Liens or pledges to secure payments of workmen's
compensation and other payments, unemployment and other insurance, old-age
pensions or other social security obligations, or the performance of bids,
tenders, leases, contracts (other than contracts for the payment of money),
public or statutory obligations, surety, stay or appeal bonds, or other
similar obligations arising in the ordinary course of business;
(iv) mechanics', workmen's, repairmen's, warehousemen's,
vendors' or carriers' Liens and landlord's liens arising by operation of
law, or other similar Liens arising in the ordinary course of business and
securing sums which are not past due or are being contested by appropriate
proceedings in accordance with and conforming to the requirements of
Section 9.2 hereof, or deposits or pledges to obtain the release of any
such Liens and which, at any one time, do not exceed $250,000 in the
aggregate;
(v) zoning restrictions, easements, licenses, restrictions on
the use of real property or minor irregularities in title thereto, which do
not materially impair the use of such property in the normal operation of
the business of the Borrower or any of its Subsidiaries or the value of
such property for the purpose of such business; and
(vi) unperfected Liens arising by operation of law under
Article 2 of the UCC in favor of unpaid sellers or prepaying buyers of
goods relating to amounts that are not past due in accordance with their
respective terms of sale;
(c) existing Liens set forth in Schedule 10.2 hereto and any renewals
thereof, but not any increase in amount thereof and not any extension thereof to
other property; and
(d) purchase money mortgages or other purchase money Liens
(including, without limitation, Capital Leases) upon any fixed or capital assets
hereafter acquired, or purchase money mortgages (including, without limitation,
Capital Leases) on any such assets hereafter acquired or existing at the time of
acquisition of such assets, whether or not assumed, so long as (i) any such Lien
does not extend to or cover any other asset of the Borrower or any of its
Subsidiaries, (ii) such Lien secures the obligation to pay the purchase price of
such asset (or the obligation under such Capital Leases) and interest thereon
only, and (iii) such Lien arises under a Capital Lease incurred in accordance
with Section 10.1(c) hereof.
(S) 10.3. Indebtedness. Create, incur, assume or suffer to exist,
------------
contingently or otherwise, any Indebtedness, other than (collectively,
"PERMITTED INDEBTEDNESS"): (a) Indebtedness under the Loan Documents (including
Hedge Agreements with any Lender or other party acceptable to the Agent); (b)
unsecured Current Liabilities incurred in the ordinary course of business other
than unsecured Current Liabilities for Indebtedness for Borrowed Money; (c)
Indebtedness (not overdue, unless contested by appropriate proceedings) secured
by Liens permitted by Section 10.2(b), (c) or (d) hereof; (d) Indebtedness for
Borrowed Money and Contingent Obligations set forth on Schedule 10.3 hereto; (e)
Indebtedness under the Subordinated
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<PAGE>
Loan Documents; (f) Indebtedness arising under the Purchase Agreement (including
contractual indemnity obligations thereunder); (g) Indebtedness relating to the
Specified Transactions; (h) taxes, assessments or other governmental charges or
levies, provided, that payment thereof shall not at the time be required in
accordance with the provisions of Section 9.2 hereof; (i) Indebtedness arising
under the Comcast Purchase Agreement (including contractual indemnity
obligations thereunder); (j) Indebtedness under the Guaranteed Note; (k)
Indebtedness with respect to Guaranty Accrued Obligations; (l) Indebtedness
under the Converted Loan; (m) the Special Subordinated Debt; (n) Indebtedness
incurred pursuant to the Takeout Financing, and (o) other Indebtedness not in
excess of at any one time, in the aggregate at any one time, $250,000.
(S) 10.4. Loans, Investments and Guarantees. Lend or advance money
---------------------------------
or credit to any Person, or invest in (by capital contribution, creation of
Subsidiaries or otherwise), or purchase or repurchase the stock or Indebtedness,
or all or a substantial part of the assets or properties, of any Person, or
enter into any exchange of securities with any Person, or guarantee, assume,
endorse or otherwise become responsible for (directly or indirectly or by any
instrument having the effect of assuring any Person's payment or performance or
capability) the Indebtedness, performance, obligations, stock or dividends of
any Person (each of the foregoing, an "INVESTMENT"), or agree to do any of the
foregoing, or permit or suffer to permit any of its Subsidiaries to do so, other
than:
(a) endorsement of negotiable instruments for deposit or collection
in the ordinary course of business;
(b) (i) Investments in securities issued, or that are directly and
fully guaranteed or insured, by the United States Government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (ii) time deposits and certificates of deposit having
maturities of not more than six months from the date of acquisition of (x) any
Lender or (y) any other domestic commercial bank having capital and surplus in
excess of $100,000,000, the holding company of which has outstanding commercial
paper meeting the requirements specified in clause (iv) below, (iii) repurchase
agreements with a term of not more than seven days for underlying securities of
the types described in clauses (i) and (ii) above (provided, that the underlying
securities of the type described in clause (i) may have maturities of more than
six months from the date of acquisition) entered into with any Lender or any
other bank meeting the qualifications specified in clause (ii) above or with
securities dealers of recognized national standing, provided, that the terms
of such agreements comply with the guidelines set forth in the Federal Financial
Institutions Examination Council Supervisory Policy Repurchase Agreements of
Depositary Institutions With Securities Dealers and Others as adopted by the
Comptroller of the Currency on October 31, 1985 (the "SUPERVISORY POLICY"), and
provided, further, that possession or control of the underlying securities is
established as provided in the Supervisory Policy, (iv) commercial paper or
other corporate obligations rated (as of the date of acquisition thereof) at
least A-1 or the equivalent thereof by Standard & Poor's Corporation and P-1 or
the equivalent thereof by Moody's Investors Service, Inc. and in either case
maturing within six months after the date of its acquisition; and (v) shares of
funds registered under the Investment Company Act of 1940, as amended, having
assets of at least $100,000,000 which invest only in obligations described above
and which shares are rated by Moody's Investors Service, Inc. or Standard &
Poor's Corporation in one of its two highest rating categories assigned by such
agencies for obligations of such nature.
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<PAGE>
(c) Investments representing stock or obligations issued to the
Borrower or any of its Subsidiaries in settlement of claims against any other
Person by reason of a composition or readjustment of debt or a reorganization of
any debtor of the Borrower or such Subsidiary;
(d) Investments representing the Indebtedness of any Person owing as
a result of the sale by the Borrower or any of its Subsidiaries in the ordinary
course of business of products or services (on customary trade terms);
(e) Investments in the stock of any present Subsidiary, but not any
additional investments therein, and investments in Subsidiaries expressly
permitted under Section 10.7 hereof;
(f) Guaranties in favor of the Agent or the Lenders;
(g) deposits for utilities, security deposits under Leases and
similar prepaid expenses incurred in the ordinary course of business;
(h) trade credits arising in the ordinary course of business;
(i) employee advances and loans arising in the ordinary course of
business not to exceed $100,000 in the aggregate outstanding at any one time;
(j) the Management Notes;
(k) Investments outstanding on the New Closing Date and described on
Schedule 10.4 hereto;
(l) Investments arising directly under the Specified Transactions;
(m) Investments in and to independent affiliates of the Borrower not
exceeding in the aggregate at any one time $100,000; and
(n) the Subordinated Guaranties.
(S) 10.5. Merger, Sale of Assets, Dissolution, Etc. Enter into any
-----------------------------------------
transaction of merger or consolidation, change its name, acquire all or a
substantial portion of the assets of any Person, or transfer, sell, assign,
lease, or otherwise dispose of all or any part of its properties or assets, or
any of its notes or Receivables, or any stock or Indebtedness for Borrowed Money
of the Borrower or any of its Subsidiaries (other than in a Takeout Financing,
Special Subordinated Takeout Financing or Initial Equity Issuance), or change
the general nature of its or their business, or issue or sell, or permit any
Subsidiary to issue or sell, (other than in a Takeout Financing, Special
Subordinated Takeout Financing or Initial Equity Issuance) any of its equity
interests or any rights, warrants or options to acquire such, or wind up,
liquidate or dissolve, or agree to do any of the foregoing, except:
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<PAGE>
(a) sales or other dispositions not exceeding $250,000 in any Fiscal
Year in aggregate book value, in the ordinary course of business of the Borrower
or a Subsidiary of the Borrower;
(b) sales or other dispositions by the Borrower, Guarantor or any
Subsidiary thereof of worn out or obsolete property (including motor vehicles
and inventory) in the ordinary course of business, or otherwise no longer
necessary for the proper conduct of business;
(c) sales of Inventory in the ordinary course of business;
(d) the abandonment of any assets and properties of the Borrower or
any Subsidiary thereof which are no longer useful in its business and cannot be
sold;
(e) acts in furtherance of the Specified Transactions;
(f) the dissolution through merger with and into the Borrower of any
Subsidiary;
(g) the formation of and the conversion of the Borrower into the
Successor Corporation in a manner permitted under Section 9.6 hereof; and
(h) the issuance of the Converted Loan or the Converted Equity
pursuant to the terms of the Guaranteed Loan Documents;
provided, that, nothing in this Section 10.5 shall be deemed to prohibit any
issuance of Indebtedness for Borrowed Money or Investment expressly permitted by
the terms of Sections 10.3 or 10.4 hereof.
(S) 10.6. Dividends, Redemptions and Other Payments. (a) Declare or
-----------------------------------------
pay, or suffer or permit any of its Subsidiaries to declare or pay, any
distributions (including, without limitation, any return of all or part of any
capital contribution or allocation of items of income or gain or any
distribution in respect of any "put option" under the Partnership Agreement) in
respect of any Partnership Interests in the Borrower or any of its Subsidiaries,
or declare or pay any dividends on any shares of capital stock of any class of
any of its Subsidiaries, in any case now or hereafter outstanding, or purchase,
redeem, cancel or acquire any Partnership Interest in the Borrower or any
Subsidiary of the Borrower, or any capital stock of any of its Subsidiaries or
any option, warrant, or other right to acquire such partnership interest or
capital stock, or apply or set apart any of its assets therefor, or make any
distribution (by reduction of capital or otherwise) in respect of any such
partnership interest or shares of capital stock or any such option, warrant or
other right, other than (i) dividends paid or distributed by any Subsidiary of
the Borrower to its direct parent, (ii) so long as no Material Default is
continuing or would occur as a result of making such cash payments, cash
payments constituting Distributable Income Taxes, and (iii) distributions in
respect of the Specified Transactions.
(b) Make any payment or prepayment of principal of or interest on, or
purchase, defease, acquire or redeem, any Indebtedness for Borrowed Money
(including, without limitation, the Earn-Out Note, the Class C Exchange Note and
the Class C-1 Exchange Note) or make any deposit in respect thereof or give
notice in respect thereof, or suffer or permit any of its
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<PAGE>
Subsidiaries to do so, provided, however, that the Borrower may (i) make
optional and mandatory payments and prepayments on the Lender Debt and regular,
scheduled mandatory payments of principal of and interest on Indebtedness for
Borrowed Money listed on Schedule 10.6(b) when and as due and payable, (ii) make
any regular, scheduled mandatory payment of interest when and as due and payable
with respect to the Subordinated Note, the Converted Loan, the securities issued
pursuant to a Takeout Financing, or the Special Subordinated Debt (in the form
as in effect on the date of execution thereof or as amended with the prior
written consent of the Majority Lenders) so long as at such time, such payment
is not prohibited under the provisions of the Subordinated Loan Documents,
including, without limitation, the subordination provisions set forth in Section
8 of the Subordinated Loan Agreement, (iii) make payment of principal on the
Guaranteed Loan solely from the Net Proceeds of a Takeout Financing, Special
Subordinated Takeout Financing or Initial Equity Issuance or by the conversion
of the Guaranteed Loan into the Converted Loan and the Converted Equity, and
(iv) so long as no Default or Event of Default is continuing and such payment
(individually or in combination with other payments) shall not cause a Default
or Event of Default to occur, (x) subject to subsection (c) below, make payments
with respect to the Specified Transactions, and (y) make payments of the
Guaranty Accrued Obligations.
(c) Make any cash payment in respect of the Earn-Out Payment unless
(i) no Default or Event of Default is continuing and the Earn-Out Payment
(individually or in combination with other payments) shall not cause a Default
or Event of Default to occur, (ii) the Borrower has achieved the EBITDA (as
defined in the Purchase Agreement) levels set forth in Section 2.5 of the
Purchase Agreement as in existence on the Closing Date, and (iii) such payment
is made on or immediately after the fifth anniversary of the Closing Date.
(d) Notwithstanding anything to the contrary contained in Section
10.6 hereof, the Borrower shall make no payment (or series of related payments
within 60 days) described in this Section 10.6 (other than regularly scheduled
payments relating to Capital Leases or payments arising in connection with a
Takeout Financing, Special Subordinated Takeout Financing or Initial Equity
Issuance) in excess of $250,000, unless and until the Borrower shall have
delivered to the Agent a certificate, in form, scope and substance acceptable to
the Agent and in such detail as the Agent shall have required, of the chief
financial officer of the Borrower, demonstrating that the Borrower is permitted
to make such payment (such certificate being required to be delivered to the
Agent at least ten Business Days' prior to the date of any such payment) and the
Agent shall not have, within five Business Days following such delivery,
objected to such payment (in whole or in part) or questioned any calculation or
assertion contained in such certificate, in any case, in writing.
(S) 10.7. Subsidiaries. Form or caused to be formed any Subsidiary
------------
without the prior written consent of the Majority Lenders (which consent shall
not be unreasonably withheld). Without in any way limiting the provisions of
the preceding sentence, in no event shall the Borrower form or caused to be
formed a Subsidiary unless and until: (i) the Borrower enters into a Pledge
Agreement and pledges 100% of the equity interests (whether capital stock,
partnership interests or other instrument) of such Subsidiary in accordance with
the terms of Section 5.8 hereof; (ii) such Subsidiary enters into a security
agreement in accordance with the terms of Section 5.1(c) hereof; (iii) such
Subsidiary enters into a security agreement relating to Intellectual Property in
accordance with the terms of Section 5.2(b) hereof; (iv) such Subsidiary enters
into
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<PAGE>
a guaranty in accordance with the terms of Section 5.7(b) hereof; and (v) such
Subsidiary agrees in writing to be bound by the covenants set forth in Sections
9 and 10 of this Agreement.
(S) 10.8. Transactions With Affiliates. Except as expressly
----------------------------
permitted under Section 10.9 hereof or with respect to the Management Option
Plan, the Guaranty Accrued Obligations, the Guaranteed Loan Guarantees, the
Conversion provided for in Section 8(c) of the Guaranteed Note, the FCC Leases
and the Specified Transactions, enter into or perform any transaction,
including, without limitation, the purchase, leasing, sale or exchange of
property or assets or the hiring or rendering of any service, with any Affiliate
of the Borrower or any Subsidiary thereof, except for any transaction which is
in the ordinary course of its business (provided, that, a Special Subordinated
Takeout Financing shall be permitted under this Section 10.8 subject to the
provisions in the following clause), and which transaction is upon fair and
reasonable terms no less favorable to it than it could obtain in a comparable
arm's length transaction with a Person not an Affiliate of the Borrower or a
Subsidiary thereof.
(S) 10.9. Management Fees and Other Payments. Suffer or permit any
----------------------------------
member of Muzak Management (i) to be employed by Centre Partners, MLP, or any of
their Affiliates, directly or indirectly, other than through employment by the
Borrower and any other Credit Party, or (ii) as to Messrs. John Jester and James
Harrison only (so long as such individuals are employed by the Borrower), to
devote less than substantially all of their business time to the business
affairs of the Credit Parties. Without limiting the generality of the foregoing,
(x) the Borrower shall provide to the Agent an annual statement setting forth
the aggregate amount of all forms of compensation paid to the five highest
compensated members of Muzak Management (excluding accretion in value for
options previously granted to such Persons), and (y) the Borrower shall not pay,
directly or indirectly, any management, consulting or similar fees to, make any
other payments of any kind to the General Partners or to any officers,
directors, or partners of the General Partners or any Affiliate of the Borrower
(except for those Persons who also are members of Muzak Management), provided,
however, the Borrower shall be permitted in all events: (i) subject to Section
10.6 hereof, to make payments of Distributable Income Taxes, (ii) to make
payments of directors fees and expenses as provided in Article IX of the
Partnership Agreement, (iii) to make payments with respect to the Specified
Transactions, (iv) so long as no Default or Event of Default is continuing and
such payment (individually or in combination with other payments) shall not
cause a Default or Event of Default to occur, to make reimbursements of the
Guaranty Accrued Obligations, (v) to make any regular, scheduled mandatory
payments of interest when and as due and payable with respect to the Special
Subordinated Debt, and (vi) to make payment of a $600,000 closing fee payable on
the Closing Date to Centre Partners, and (v) to make payments to Centre Partners
of (1) $50,000 on or about November 23, 1993, (2) $324,000 on the New Closing
Date (upon the consummation of the Comcast Acquisition), (3) $100,000 on the New
Closing Date (upon the execution by MLP of each of the Guaranteed Loan Documents
to which it is a party), and (4) $300,000 upon performance in full by MLP of all
of its obligations under the Guaranteed Loan Documents.
(S) 10.10. Compromise of Receivables. Compromise or adjust any of
-------------------------
the Receivables (or extend the time for payment thereof) or grant any discounts,
allowances or credits thereon, other than discounts, allowances, extensions or
credits of Receivables in the ordinary course of business.
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(S) 10.11. Noncompliance With ERISA. (a) Engage in any transaction
------------------------
in connection with which any Credit Party could be subject to either a material
civil penalty assessed pursuant to the provisions of Section 502(i) of ERISA or
a material tax imposed under the provisions of Section 4975 of the Code;
(b) adopt an amendment or suffer or permit any other Credit Party to
adopt an amendment, to any Pension Benefit Plan requiring the provision of
security under Section 307 of ERISA or Section 401(a)(29) of the Code;
(c) terminate, or suffer or permit any other Credit Party or any
ERISA Affiliate to terminate, any Pension Benefit Plan under Section 4041(c) of
ERISA;
(d) fail to make any material payment when due of any amounts which,
under the provisions of any Employee Plan or Multiemployer Plan, any Credit
Party or any ERISA Affiliate is required to pay as contributions thereto or as
premiums to the PBGC, or with respect to any Pension Benefit Plan, suffer or
permit to exist any material "accumulated funding deficiency" (within the
meaning of Section 302 of ERISA and Section 412 of the Code);
(e) enter into a new agreement that would obligate any Credit Party
or any ERISA Affiliate to make contributions to a Multiemployer Plan which is an
employee pension benefit plan as defined in Section 3(2) of ERISA, other than as
may be required pursuant to the terms of any collective bargaining agreement
which is in effect as of the date hereof or as in effect as of any date in the
future; or
(f) create, extend or increase any obligation to provide health or
medical benefits to retirees (other than at the retirees' own expense) of any
Credit Party other than as may be required pursuant to the terms of any
collective bargaining agreement which is in effect as of the date hereof or at
any date in the future or pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and the regulations thereunder, or any
other applicable federal, state or local law; provided, that, the Borrower may,
and may permit its Subsidiaries to, provide employer-paid COBRA coverage to
employees terminated pursuant to individual severance arrangements, for a period
not to exceed two years, and; provided, further, that, such coverage shall not
in the aggregate result in material liability to the Borrower.
(S) 10.12. Amendments and Modifications. (a) Directly or
----------------------------
indirectly, amend, modify, supplement, waive compliance with, seek or grant a
waiver under, or assent to noncompliance with: (i) any instrument, document or
agreement evidencing, creating, guaranteeing or governing Indebtedness for
Borrowed Money in excess of $250,000 permitted under Section 10.3 hereof or
entered into in connection therewith (other than the Earn-Out Note, the Class C
Exchange Note and the Class C-1 Exchange Note, which are governed by clause (ii)
below, and other than the Borrower's master automobile lease documents) in any
material respect or in any manner that is adverse to the Lenders; (ii) the Earn-
Out Note, the Class C Exchange Note, the Class C-1 Exchange Note or the
Subordinated Loan Documents (including, without limitation, the subordination
provisions thereunder); (iii) the Purchase Agreement (including, without
limitation, Section 2.5 thereof and Schedule 2.5(a) thereto) or any other
Purchase Document, provided, that, so long as no Event of Default is continuing,
the Borrower may settle with the Seller (x) all calculation disputes under
Section 2.3 and 2.4 of the Purchase Agreement, (y) all
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calculation disputes under Section 2.5 of the Purchase Agreement, and (z) any
reimbursement or indemnity claims asserted by any party under the Purchase
Agreement in an amount not in excess of $750,000; (iv) the Comcast Purchase
Agreement or any other Comcast Purchase Document, provided, that, so long as no
Event of Default is continuing, the Borrower may settle with the Transferors (x)
all calculation disputes under Section 2.3 and 2.4 of the Comcast Purchase
Agreement, and (y) any reimbursement or indemnity claims asserted by any party
under the Comcast Purchase Agreement in an amount not in excess of $500,000; (v)
those matters in the Management Option Plan relating to the vesting of options
(as generally set forth in Section 9 of the Management Option Plan); (vi) any
Management Note in a manner that would have the effect of forgiving any
Indebtedness or extending the final maturity date thereunder; and (vii) any term
of the Guaranteed Loan that would direct the payment by the Borrower of the
Guaranteed Note from any funds other than from the Net Proceeds of a Takeout
Financing, Special Subordinated Takeout Financing or Initial Equity Issuance, or
otherwise would have a Material Adverse Effect.
(b) Directly or indirectly, amend, modify, supplement, waive
compliance with, seek or grant a waiver under, or assent to noncompliance with:
(i) any material term of the Partnership Agreement; (ii) any term of the
Partnership Agreement that adversely affects the Lenders (in such capacity
only), including, without limitation, Articles I, III, V, VI, VII, IX, Sections
11.02(d), 11.03(i), 11.10(f), 11.10(g), Article XII, Sections 13.01 and 13.04,
and Articles XVI and XVII of the Partnership Agreement; or (iii) any term of the
certificate of incorporation, by-laws or partnership agreement of any Credit
Party.
(S) 10.13. Agreements with Management. Enter into any agreements or
--------------------------
arrangements with management of the Borrower, including Muzak Management, other
than employment contracts in the ordinary course of business and transactions
pursuant to the Management Option Plan in effect on the Closing Date.
(S) 10.14. Fiscal Year. Change the Fiscal Year of the Borrower or
-----------
any of its Subsidiaries to other than a December 31st fiscal year.
(S) 10.15. Change of Business. Alter in any material respect the
------------------
nature of its business or engage in any business other than the business of on-
location and broadcast business services, which include without limitation
producing, marketing and distributing programmed music, music video services,
data communications services, video communications services, in store
advertising and promotion services, electronic publishing and information
distribution services, related equipment and ancillary communications and
related services, all as engaged in on the Closing Date.
(S) 10.16. Negative Pledges. Except for the Partnership Agreement,
----------------
the Purchase Agreement, the Comcast Purchase Agreement, the Guaranteed Loan, the
Subordinated Loan Documents and the documents governing the Special Subordinated
Debt and the Converted Loan, enter into or become subject to, directly or
indirectly, including, without limitation, as a non-party Subsidiary of a party
to any agreement, (a) (other than with respect of Capital Leases permitted
hereunder, including under Section 10.1 hereof) prohibiting or restricting, in
any manner (including, without limitation, by way of covenant, representation or
event of default), (i) the incurrence, creation or assumption of any
Indebtedness, or any Lien upon any property of
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any Credit Party, (ii) the sale, disposition or pledge of any asset of any
Credit Party, (iii) the incurrence or existence of any Contingent Obligations of
any Credit Party, (iv) any investments of any Credit Party, (v) any capital
expenditures by any Credit Party, (vi) any acquisition, merger or consolidation
involving any Credit Party, (vii) any change in control of any Credit Party
(except that such provision shall be permitted in an agreement with a Credit
Party for the leasing of real estate), or (viii) any amendment or supplement to
or waiver under this Agreement or any other Loan Document or other document
relating to the Lender Debt, or (b) providing that any default by any Credit
Party which is not a party to such agreement of any obligation not arising under
such agreement is a default under such agreement.
(S) 10.17. Rental Obligations. Incur, create, assume or permit to
------------------
exist, in respect of leases of real or personal property, rental obligations or
other commitments thereunder (other than Capitalized Lease Obligations) or to
make any direct or indirect payment, whether as rent or otherwise, for fixed or
minimum rentals, percentage rentals, property taxes, or insurance premiums,
during each Fiscal Year, in excess of 15% of revenues of the Borrower and its
Subsidiaries (determined in accordance with GAAP) in such Fiscal Year.
SECTION 11. DEFAULTS AND REMEDIES
(S) 11.1. Events of Default. If any one or more of the following
-----------------
events (herein called "EVENTS OF DEFAULT") shall occur for any reason whatsoever
(and whether such occurrence shall be voluntary or involuntary or come about or
be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or Governmental Body):
(a) default shall be made in the due and punctual payment of the
principal of any of the Loans or the reimbursement of any drawings under
Letters of Credit, when and as the same shall become due and payable
whether pursuant to Section 2 hereof, at maturity, by acceleration or
otherwise; or
(b) default shall be made in the due and punctual payment of any
installment of interest on any of the Loans or any other Lender Debt or of
any fee or expense owing to any Lender or the Agent pursuant to any of the
Loan Documents, when and as such amount of interest, fee or expense shall
become due and payable and such default shall continue unremedied for five
Business Days; or
(c) default shall be made by any Credit Party (or, with respect
to the Pledge Agreements, the General Partners, the Class B Partners and
the General Partners of MLP Communications Company) in the performance or
observance of, or shall occur under, any covenant, agreement or provision
(other than as described in clause (a) or (b) above) contained in this
Agreement or any other Loan Document or in any instrument or document
evidencing or creating any obligation, guaranty or Lien in favor of the
Agent or delivered to the Lenders or the Agent in connection with or
pursuant to this Agreement or any Lender Debt, and, except in the case of
the agreements and covenants contained in Sections 9.1(a), 9.1(b), 9.1(c),
9.1(f), 9.1(g), 9.1(n), 9.6, 9.8, 9.21 and Section 10.1, Sections 10.3
through 10.16, as to each of which no notice or grace period, except as
otherwise set forth in this Section 11.1, shall apply, continuance of such
default for a
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period of thirty days after there has been given Written Notice of such
default to any of the Credit Parties by the Agent, or if this Agreement or
any other Loan Document or any such other instrument or document shall
terminate, be terminated or become void or unenforceable for any reason
whatsoever without the written consent of the Agent; or
(d) one or more defaults shall occur under the Guaranteed Loan,
including, without limitation, in the due and punctual payment of any
amounts of interest or principal due, or of any fee or expense owing
thereunder pursuant to the terms of the Guaranteed Note, when and as such
amount of interest, principal, fee or expense shall become due and payable,
and such default shall continue unremedied for five Business Days past any
grace period provided for thereunder; or
(e) one or more defaults shall occur under the Put and Call or
either of the Guaranteed Loan Guarantees, including, without limitation, in
the due and punctual payment of any amounts due, or of any fee or expense
owing thereunder pursuant to the terms of the Put and Call or either of the
Guaranteed Loan Guarantees, when and as such amount, fee or expense shall
become due and payable, and such default shall continue unremedied for five
Business Days past any grace period provided for thereunder; or
(f) (i) one or more defaults shall occur and be continuing in the
payment of any principal, interest or premium with respect to any
Indebtedness for Borrowed Money or any obligation which is the substantive
equivalent of Indebtedness for Borrowed Money (including, without
limitation, obligations under conditional sales contracts, finance leases
and the like but excluding trade payables incurred in the ordinary course
of business) of which any Credit Party is principal, guarantor, or other
surety, outstanding in a principal amount of at least $400,000 in the
aggregate, or (ii) one or more defaults shall occur and be continuing under
any agreement or instrument under or pursuant to which any such
Indebtedness for Borrowed Money (in a principal amount of at least $400,000
in the aggregate) may have been issued, evidenced, created, assumed,
guaranteed or secured by any Credit Party and, in the case of either clause
(i) or (ii) of this Section 11.1(f), such default shall continue for more
than the period of grace, if any, therein specified and any holder of any
such Indebtedness for Borrowed Money (or any agent or trustee therefor)
shall be entitled to take any action to accelerate such Indebtedness for
Borrowed Money or realize upon any Lien on any property securing same, or
(iii) Indebtedness for Borrowed Money or obligation (in a principal amount
of at least $400,000 in the aggregate) shall be declared due and payable
prior to the stated maturity thereof; or
(g) any representation, warranty or other statement of fact
given herein or in any writing, certificate, report or statement at any
time furnished by or on behalf of any Credit Party to any Lender or the
Agent pursuant to or in connection with this Agreement (including, without
limitation, any Borrower's Certificate or Borrowing Base Certificate) or
any other Loan Document or any Purchase Document, shall be false or
misleading in any material respect when given; or
(h) any Credit Party shall (i) be unable to pay its debts
generally as they become due; (ii) file a petition to take advantage of any
insolvency act; (iii) make an
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assignment for the benefit of its creditors; (iv) commence a proceeding for
the appointment of a receiver, trustee, liquidator or conservator of itself
or of a whole or any substantial part of its property; (v) file a petition
or answer seeking reorganization or arrangement or similar relief under the
Federal Bankruptcy Code or any other applicable law or statute of the
United States of America or any state; or (vi) by appropriate proceedings
of the board of directors, or the general or limited partners or other
governing body of any Credit Party, authorize the filing of any such
petition, making of such assignment or commencement of such a proceeding;
or
(i) a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of any Credit Party or of the whole or any substantial part of
its properties, or approve a petition filed against any Credit Party
seeking reorganization or arrangement or similar relief under the Federal
Bankruptcy Code or any other applicable law or statute of the United States
of America or any state; or if, under the provisions of any other law for
the relief or aid of debtors, a court of competent jurisdiction shall
assume custody or control of any Credit Party or of the whole or any
substantial part of its properties; or if there is commenced against any
Credit Party any proceeding for any of the foregoing relief and such
proceeding or petition remains undismissed for a period of sixty days; or
if any Credit Party by any act indicates its consent to or approval of any
such proceeding or petition; or
(j) (i) any judgment remaining unpaid, unstayed or undismissed
for a period of 30 days is rendered against any Credit Party which by
itself or together with all other such judgments rendered against such
Credit Party remaining unpaid, unstayed or undismissed for a period of 30
days, is in excess of $100,000, or (ii) there is any attachment, injunction
or execution against any of its properties remaining unstayed or
undismissed for a period of 30 days which by itself or together with all
other attachments, injunctions and executions against its properties
remaining unstayed or undismissed for a period of 30 days is for an amount
in excess of $100,000; or
(k) (i) a Reportable Event shall have occurred with respect to a
Pension Benefit Plan;
(ii) any Credit Party or any ERISA Affiliate, or an
administrator of any Pension Benefit Plan shall have filed a notice of
intent to terminate a Pension Benefit Plan in a "distress termination"
under the provisions of Section 4041(c) of ERISA;
(iii) any Credit Party or any ERISA Affiliate, or an
administrator of a Pension Benefit Plan shall have received a notice
that the PBGC has instituted proceedings to terminate (or appoint a
trustee to administer) a Pension Benefit Plan;
(iv) any Credit Party or any ERISA Affiliate has
incurred, or is likely to incur, a material liability under the
provisions of Sections 4041(c), 4062, 4063, 4064 or 4201 of ERISA;
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(v) any Person shall engage in any transaction in
connection with which any Credit Party could be subject to either a
material civil penalty assessed pursuant to the provisions of Section
502(i) of ERISA or a material tax imposed under the provisions of
Section 4975 of the Code;
(vi) any Credit Party or any ERISA Affiliate fails to
pay the full amount of any installment due under Section 412(n) of the
Code such that a Lien could arise under Section 412(m) of the Code; or
(vii) the Agent shall have provided a notice of Default
that the Agent has determined in its reasonable judgment, both that
(a) the ERISA Affiliates, in the aggregate, in light of the business,
operations, liabilities, assets, properties, prospects or financial
condition of such ERISA Affiliates, do not have the economic
wherewithal from their financial resources (determined without regard
to the economic wherewithal of the Credit Parties) to satisfy all the
Liabilities of each Underfunded Pension Benefit Plan; and (b) if the
Borrower and its Subsidiaries taken as a whole were required to make
contributions to each such Plan sufficient to reduce such Liabilities
to zero immediately, such contributions would have a Material Adverse
Effect; provided, however, that no Event of Default shall be deemed to
exist under this Section 11.1(k)(vii) if the Borrower shall have
furnished within 30 days of a notice of Default by the Agent pursuant
to this Section 11.1(k)(vii) an unqualified opinion of counsel from a
law firm that is reasonably acceptable to the Agent that the
entity(ies) maintaining or contributing to the Underfunded Pension
Plan is (are) not an entity(ies) within the controlled group or under
common control with any Credit Party within the meaning of Section 414
of the Code and the regulations promulgated and the rulings issued
thereunder. As used herein, the term "Underfunded Pension Benefit
Plan" shall mean a Pension Benefit Plan subject to Title IV of ERISA
that has Liabilities. As used herein, the term "Liabilities" shall
mean the liabilities as shown on Schedule B of the latest Form 5500
filed with respect to each Underfunded Pension Benefit Plan determined
as of the latest actuarial valuation date of such Plan and calculated
in accordance with the actuarial assumptions and methods used by such
Plan for purposes of Sections 4041(c), 4062, 4063 or 4064 of ERISA, or
if such calculation is not available (without imposing an obligation
on the ERISA Affiliate to cause such a calculation to be conducted),
determined as of the latest actuarial valuation date of such Plan and
calculated in accordance with the actuarial assumptions and methods
used by such Plan for purposes of Section 412 of the Code and
determined net of the fair market value of the assets of such Plan as
shown on the latest Form 5500 filed with respect to such Plan; or
(viii) the Agent shall have provided a notice of Default
that the Agent has determined in its reasonable judgment, both that
(a) the ERISA Affiliates, in the aggregate, in light of the business,
operations, liabilities, assets, properties, prospects or financial
condition of such ERISA Affiliates, do not have the economic
wherewithal from their financial resources (determined without regard
to the economic wherewithal of the Credit Parties) to make a lump-sum
withdrawal liability payment required to satisfy fully an assessment
of withdrawal
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liability, as defined in Section 4201 of ERISA, from a Multiemployer
Plan; and (b) if the Borrower and its Subsidiaries taken as a whole
were required to make such payments to such Multiemployer Plan in the
form of a lump sum, such payment would have a Material Adverse Effect;
provided, however, that no Event of Default shall be deemed to exist
under this Section 11.1(k)(viii) if the Borrower shall have furnished
within 30 days of a notice of Default by the Agent pursuant to this
Section 11.1(k)(viii) an unqualified opinion of counsel from a law
firm that is reasonably acceptable to the Agent that the entity(ies)
receiving such assessment is (are) not an entity(ies) within the
controlled group or under common control with any Credit Party within
the meaning of Section 414 of the Code and the regulations promulgated
and the rulings issued thereunder.
and in each case in clauses (i) through (viii) above, in the reasonable
opinion of the Majority Lenders, such event or condition, together with all
other events or conditions, if any, could subject the Borrower to any tax,
penalty or other liabilities which in the aggregate would be material in
relation to the business, operations, liabilities, assets, properties,
prospects or condition (financial or otherwise) of the Borrower; or
(l) a Change of Control shall occur; or
(m) a default by any Credit Party under any provision of any
Lease or Leases shall occur which would permit the lessor or lessors
thereunder to terminate the Lease or Leases or exercise any other rights
under such Lease or Leases in a manner which would have a Material Adverse
Effect; or
(n) any Credit Party shall effect any distribution of any of its
equity or debt securities which are required to be registered under (S) 5
of the Securities Act of 1933, as amended, or which is exempt from such
registration other than by virtue of (S) 4(2) of such Act; or
(o) FCC Licenses that service greater than 1,000 subscribers in
the aggregate shall not be in full force and effect and the services
provided by such FCC Licenses shall not have been replaced by the Borrower
within 30 days of the loss of such services; or
(p) any of the FCC Leases shall be terminated or not renewed, or
any such FCC Lease shall have been assigned (or any rights thereunder shall
have been assigned) without the prior written consent of the Agent; or
(q) any FCC License held by MLP Communications Company shall
have been assigned to, or acquired by, any Person or entity other than MLP
Communications Company; or
(r) the interests of the Borrower or any of its FCC Affiliates
under any FCC License acquired after the Closing Date shall not have been
assigned to MLP Communications Company and shall not have been made subject
to an FCC Lease within
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one hundred eighty (180) days following the acquisition of such interest in
an FCC License by the Borrower or such Affiliate; or
(s) except as otherwise permitted under Section 10.12 hereof,
any amendment, supplement, allonge or other modification shall have been
made effective with respect to (i) the Certificate of Incorporation of
Music Holdings Corp. or MLP Administration Corp., (ii) the partnership
agreements of MLP Acquisition, L.P. or MLP Communications Company, or (iii)
the Partnership Agreement (other than as permitted under Section 10.12(b)
hereof);
then, and in any such event and at any time thereafter, if such or any other
Event of Default shall then be continuing:
(A) either or both of the following actions may be taken: (i)
the Agent may, at its option, or, the Agent shall, upon the direction of
the Majority Lenders, (x) declare any obligation to lend hereunder
terminated, and/or (y) declare any obligation to issue Letters of Credit
hereunder terminated, whereupon such obligation to make further Loans or
issue Letters of Credit hereunder shall terminate immediately and (ii) the
Agent may, at its option, or, the Agent shall, upon the direction of the
Majority Lenders, declare any or all of the Lender Debt to be due and
payable, and the same, all interest accrued thereon and all other Lender
Debt shall forthwith become due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything contained herein or in any instrument evidencing the Lender Debt
to the contrary notwithstanding; provided, however, that notwithstanding
the above, if there shall occur an Event of Default under clause (h) (other
than clause (h)(i)) or (i) above, then the obligation of the Lenders to
lend and issue Letters of Credit hereunder shall automatically terminate
and any and all of the Lender Debt shall be immediately due and payable
without any action by the Agent or any Lender;
(B) the Agent shall have and may exercise all rights and
remedies of a mortgagee or a secured party under the UCC in effect in the
State of New York at such time, and as a mortgagee, secured party,
beneficiary under the deeds of trust, Mortgages or other Security
Documents, whether or not applicable to the affected Collateral, and
otherwise, including, without limitation, the right to foreclose the Liens
granted herein or in any of the Security Documents by any available
judicial procedure and/or to take possession of any or all of the
Collateral, the other security for the Lender Debt and the books and
records relating thereto, with or without judicial process; for the
purposes of the preceding sentence, the Agent may enter upon any or all of
the premises where any of the Collateral, such other security or books or
records may be situated and take possession and remove the same therefrom;
and
(C) the Agent shall have the right, in its sole discretion, to
determine which rights, Liens or remedies it shall at any time pursue,
relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of them or any of
the Lenders' rights hereunder; and any moneys, deposits, Receivables,
balances or other property which may come into any Lender's or the Agent's
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hands at any time or in any manner, may be retained by such Lender or the
Agent and applied to any of the Lender Debt.
(S) 11.2. Suits for Enforcement. In case any one or more Events of
---------------------
Default shall occur and be continuing, the Agent on behalf of the Agent and the
Lenders may proceed to protect and enforce their rights or remedies either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any document or instrument delivered in connection with or pursuant to this
Agreement or any other Loan Document, or to enforce the payment of the Lender
Debt or any other legal or equitable right or remedy.
(S) 11.3. Rights and Remedies Cumulative. No right or remedy herein
------------------------------
conferred upon the Lenders or the Agent is intended to be exclusive of any other
right or remedy contained herein or in any instrument or document delivered in
connection with or pursuant to this Agreement or any other Loan Document, and
every such right or remedy shall be cumulative and shall be in addition to every
other such right or remedy contained herein and therein or now or hereafter
existing at law or in equity or by statute, or otherwise.
(S) 11.4. Rights and Remedies Not Waived. No course of dealing
------------------------------
between any of the Credit Parties and any Lender or the Agent or any failure or
delay on the part of any Lender or the Agent in exercising any rights or
remedies hereunder shall operate as a waiver of any rights or remedies of the
Lenders or the Agent and no single or partial exercise of any rights or remedies
hereunder shall operate as a waiver or preclude the exercise of any other rights
or remedies hereunder or of the same right or remedy on a future occasion.
(S) 11.5. Application of Proceeds. After the occurrence of an Event
-----------------------
of Default and acceleration of the Lender Debt, the proceeds of the Collateral
and of property of Persons other than the Credit Parties securing the Lender
Debt and collections from each Guaranty shall be applied by the Agent to payment
of the Lender Debt in the following order, unless the Lenders otherwise agree in
writing or a court of competent jurisdiction shall otherwise direct:
(i) FIRST, to each Issuing Lender to reimburse the Issuing
Lender for that portion of any payments made by it with respect to Letters
of Credit for which a Lender, as a participant in such Letter of Credit,
failed to pay its pro rata share thereof as required pursuant to Section
13.17 hereof;
(ii) SECOND, to each Lender (or any Affiliate of a Lender)
to reimburse such Lender (or any Affiliate of such Lender) for amounts due
under any Hedge Agreements;
(iii) THIRD, to payment of all costs and expenses of the
Agent and the Lenders incurred in connection with the preservation,
collection and enforcement of the Lender Debt or any Guaranties, or of any
of the Liens granted to the Agent pursuant to the Security Documents or
otherwise, including, without limitation, any amounts advanced by the Agent
or the Lenders to protect or preserve the Collateral;
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(iv) FOURTH, to payment of that portion of the Lender Debt
constituting accrued and unpaid interest and fees and indemnities payable
under Sections 2 and 4 hereof, ratably amongst the Agent and the Lenders in
accordance with the proportion which the accrued interest and fees and
indemnities payable under Sections 2 and 4 hereof constituting the Lender
Debt owing to the Agent and each such Lender at such time bears to the
aggregate amount of accrued interest and fees and indemnities payable under
Sections 2 and 4 hereof constituting the Lender Debt owing to the Agent and
all of the Lenders at such time until such interest, fees and indemnities
shall be paid in full;
(v) FIFTH, to payment of the principal of the Lender Debt
(excluding the aggregate undrawn amount of any then outstanding Letters of
Credit), ratably amongst the Lenders in accordance with the proportion
which the principal amount of the Lender Debt owing to each such Lender
bears to the aggregate principal amount of the Lender Debt (excluding the
aggregate undrawn amount of any then outstanding Letters of Credit) owing
to all of the Lenders until such principal of the Lender Debt shall be paid
in full;
(vi) SIXTH, to the extent, with respect to Letters of
Credit, that the collateral, if any, held by the Agent as security for the
Letters of Credit is less than the undrawn amount of the Letters of Credit
outstanding at the time of distribution hereunder, to the Agent to be held
by the Agent as additional collateral therefor;
(vii) SEVENTH, to the payment of all other Lender Debt,
ratably amongst the Lenders in accordance with the proportion which the
amount of such other Lender Debt owing to each such Lender bears to the
aggregate principal amount of such other Lender Debt owing to all of the
Lenders until such other Lender Debt shall be paid in full; and
(viii) EIGHTH, the balance, if any, after all of the Lender
Debt has been satisfied, shall, except as otherwise provided in the
Security Documents, be deposited by the Agent in an operating account of
the Borrower with the Agent designated by the Borrower, or paid over to
such other Person or Persons as may be required by law.
The Credit Parties acknowledge and agree that they shall remain liable
to the extent of any deficiency between the amount of the proceeds of the
Collateral and collections under the Guaranties (to the fullest extent recourse
to such Credit Parties under such Guaranties) and the aggregate amount of the
sums referred to in the first through seventh clauses above.
(S) 11.6. FCC Approval. Notwithstanding anything to the contrary
------------
contained in this Agreement or in the other Loan Documents, neither the Agent
nor any Lender will take any action pursuant to this Agreement or any of the
other Loan Documents, which would constitute or result in a change in control of
MLP Communications Company requiring the prior approval of the FCC without first
obtaining such prior approval of the FCC. After the occurrence of any Event of
Default, the Agent, upon the direction of the Majority Lenders, shall take or
use reasonable efforts to cause to be taken by the Borrower, and its FCC
Affiliates, as the case may be, any action which the Majority Lenders may
reasonably request in order to obtain from the FCC such approval(s) as may be
necessary to enable the Lenders to exercise and enjoy the full rights and
benefits granted to the Lenders by this Agreement or any of the other Loan
Documents,
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including, at the Borrower's cost and expense, the use of any Credit Party's
best efforts to assist in obtaining such approval for any action or transaction
contemplated by this Agreement or any of the other Loan Documents for which such
approval is or should be required by law, including specifically, without
limitation, upon request, to prepare, sign and file with the FCC the assignor's
or transferor's portions of any application or applications for the consent to
the assignment of licenses or transfer of control necessary or appropriate under
the FCC Rules for approval of any of the transactions contemplated by this
Agreement or any of the other Loan Documents. Upon receipt of such request from
the Agent, the Borrower and each other Credit Party shall fully cooperate and
use its best efforts (and shall cause its FCC Affiliates to fully cooperate and
to use their respective best efforts) to assist in obtaining such approvals for
any action or transaction contemplated by this Agreement or any of the other
Loan Documents for which such approvals are or should be required by law,
including specifically, without limitation, upon request, to prepare, sign and
file with the FCC, the assignor's or transferor's portions of any application or
applications for the consent to the assignment of licenses or transfer of
control necessary or appropriate under the FCC Rules for approval of any of the
transactions contemplated by this Agreement or any of the other Loan Documents.
SECTION 12. REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants as follows (assuming that
the Comcast Acquisition, if it becomes effective, and the making of the Loans by
the Lenders, if made, occur simultaneously on the New Closing Date), which
representations and warranties shall survive the execution and delivery of this
Agreement and shall be deemed to be incorporated in each officer's certificate
submitted to the Agent pursuant to Section 7.1 hereof, and shall be deemed
repeated and confirmed with respect to, and as of the date of, each borrowing
and each issuance of a Letter of Credit hereunder and each notice thereof,
provided, that any representation or warranty which is made as of a specified
date shall be deemed repeated as of such date:
(S) 12.1. Limited Partnership and Corporate Status. (a) The
----------------------------------------
Borrower is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware, with its principal place of
business at the address set forth on the signature pages hereof for the
Borrower. Each non-corporate Subsidiary of the Borrower is (or, upon creation
pursuant to the terms of Section 10.7 hereof, will be) a general or limited
partnership, duly organized, validly existing and in good standing under the
laws of the jurisdiction, and with its principal place of business at the
address, set forth on Schedule 12.1(a) hereto in respect of such Subsidiary.
The Borrower and each non-corporate Subsidiary has all requisite partnership
power and authority to own and operate its properties, to carry on its business
in the manner and in the places now being conducted and as contemplated to be
conducted after giving effect to the Comcast Acquisition, and to execute,
deliver and perform its obligations under this Agreement, each other Loan
Document to which it is a party, each Purchase Document to which it is a party
and each Guaranteed Loan Document to which it is a party.
(b) As of the New Closing Date, except with respect to the holding of
the German Licensee Shares, the Borrower has no Subsidiaries. Each corporate
Subsidiary, if any, is (i) a duly organized and validly existing corporation in
good standing under the laws of the state of its incorporation with perpetual
corporate existence, and has the corporate power and authority to own its
properties and to transact the business in which it is engaged or presently
proposes to
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engage, and (ii) qualified as a foreign corporation and in good standing in each
other jurisdiction in which it owns or leases property of a nature, or transacts
business of a type, that would make such qualification necessary except where
failure to qualify would not have a Material Adverse Effect.
(c) All equity interests in the Borrower, each Subsidiary of the
Borrower and the General Partners are owned as set forth on Schedule 12.1(c)
hereto (which shall be updated from time to time upon the formation of any new
Subsidiary and delivered to the Agent and each Lender) and all such equity
interests are free and clear of all Liens, except as contemplated by this
Agreement and the Loan Documents and the restrictions on transfer of Partnership
Interests set forth in the Partnership Agreement.
(d) None of the Credit Parties has any Subsidiaries except as set
forth in Schedule 12.1(d) hereto (which shall be updated from time to time upon
the formation of any new Subsidiary of the Borrower and delivered to the Agent
and each Lender), which Schedule 12.1(d) correctly sets forth the name of each
such Subsidiary, its jurisdiction of incorporation or formation and a statement
of the outstanding capitalization of each such Subsidiary as of the date of
delivery of such Schedule 12.1(d).
(S) 12.2. Power and Authority. Each of the Credit Parties, the
-------------------
General Partners and each general partner of each Credit Party other than the
Borrower has the corporate or partnership power and authority, as the case may
be, to execute, deliver and perform the terms and provisions of this Agreement,
the other Loan Documents, the Purchase Documents and the Guaranteed Loan
Documents, in each case, to which it is a party or, in the case of the General
Partners or the general partner of each Credit Party other than the Borrower,
which it will execute, deliver and perform on behalf of the Borrower or such
other Credit Party, respectively, and all instruments and documents delivered by
it pursuant thereto and hereto and each of the Credit Parties, the General
Partners and the general partner of each Credit Party other than the Borrower
has duly taken or caused to be duly taken all necessary corporate or partnership
action, as the case may be (including, without limitation, the obtaining of any
consent of stockholders or partners required by law or its certificate of
incorporation or by-laws or partnership agreement), to authorize the execution,
delivery and performance of this Agreement, each other Loan Document, the
Purchase Documents and the Guaranteed Loan Documents, in each case, to which it
is a party or, in the case of the General Partner or the general partner of each
Credit Party other than the Borrower, which it will execute, deliver and perform
on behalf of the Borrower or such other Credit Party, respectively, and the
instruments and documents delivered by it pursuant thereto and hereto. Each of
this Agreement, the other Loan Documents, the Purchase Documents, the Guaranteed
Loan Documents and each of the other instruments and documents executed and
delivered by any of the Credit Parties, the General Partners or the general
partner of each Credit Party other than the Borrower pursuant hereto and thereto
to which it is a party constitute a legal, valid and binding obligation of such
Person, and is enforceable in accordance with its terms.
(S) 12.3. No Violation of Agreements. (a) Except for the agreements
--------------------------
listed on Schedule 12.3(a) hereof, none of the Credit Parties, the General
Partners or any other general partner of any Credit Party is in default under
any indenture, mortgage, deed of trust, agreement
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or other instrument (other than any Lease) to which any of them is a party or by
which any of them may be bound except where such default would not have a
Material Adverse Effect.
(b) Neither the execution and delivery of this Agreement, the other
Loan Documents, the Purchase Documents, the Guaranteed Loan Documents or any of
the instruments and documents to be delivered pursuant hereto or thereto, nor
the consummation of the transactions herein and therein contemplated, nor
compliance with the provisions hereof or thereof, nor the execution, delivery
and performance by the General Partners or by any other general partner of any
Credit Party of this Agreement, the other Loan Documents, the Purchase Documents
or the Guaranteed Loan Documents or any of such instruments or documents, nor
compliance with the provisions hereof or thereof, will violate any provision of
the certificate of incorporation or by-laws or partnership agreement, as the
case may be, of any of the Borrower or any of its Subsidiaries or any of the
General Partners or of any other general partner of any Credit Party or any law
or regulation, or any order or decree of any court or governmental
instrumentality, or, except as described on Schedule 12.3(b), will (i) conflict
with, or result in the breach of, or constitute a default under, any indenture,
mortgage, deed of trust, agreement or other instrument to which the Borrower or
any of its Subsidiaries or any of the General Partners or any other general
partner of any Credit Party is a party or by which any of them or their
respective properties may be bound, or (ii) except as contemplated under this
Agreement, result in the creation or imposition of any Lien upon any property of
the Borrower or any of its Subsidiaries or any of the General Partners or any
other general partner of any Credit Party.
(S) 12.4. No Litigation. Except as disclosed on Schedule 12.4
-------------
hereto, (a) there are no actions, suits or proceedings pending or, to the best
knowledge of the Borrower, threatened against the General Partners or any of the
Credit Parties or any of their respective Subsidiaries before any court,
arbitrator or Governmental Body which challenge the validity or propriety of the
transactions contemplated under this Agreement, the other Loan Documents, the
Purchase Documents, the Guaranteed Loan Documents or the documents, instruments
and agreements executed or delivered in connection herewith, therewith or
related thereto, or which, if adversely determined, would result in any Material
Adverse Effect; (b) no General Partner or Credit Party is in default in any
material respect under any applicable statute, rule, order, decree or regulation
of any court, arbitrator or Governmental Body having jurisdiction over such
Credit Party or Subsidiary; and (c) no judgment, order, injunction or other
similar restraint with respect to any General Partner, Credit Party or any
Subsidiary thereof exists which prohibits any of the other transactions
contemplated hereby or in connection herewith.
(S) 12.5. Good Title to Properties; Condition of Assets. (a) Except
---------------------------------------------
as described on Schedule 12.5(a)-1 and except as non-compliance under this
Section 12.5(a) hereof would have a Material Adverse Effect (and as to the
Comcast Assets, to the best knowledge of the Borrower), each Credit Party and
each of their respective Subsidiaries owns and has good and marketable title to
all the Real Estate and other properties and assets reflected on its balance
sheet and valid leasehold interests in the property it leases, including,
without limitation, the Collateral, subject to no Liens, except Permitted Liens.
All Real Estate owned by or leased to any Credit Party or any Subsidiary thereof
is described on Schedule 12.5(a)-2 annexed hereto.
(b) Except as listed on Schedule 12.5(b) hereto (and as to the
Comcast Assets, to the best knowledge of the Borrower), each Lease described on
Schedule 12.5(a)-2 hereto is in
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full force and effect, is valid and binding and is enforceable in accordance
with its terms. Except as described on Schedule 12.5(b) (and as to the Comcast
Assets, to the best knowledge of the Borrower), there exists no default by any
Credit Party, or by any other Person, under any provision of any Lease which
would permit the lessor thereunder to terminate the Lease or to exercise any
other rights under such Lease which would have an adverse effect on the Lenders'
interest in any Collateral located on the premises in respect of any Lease.
(c) Except as set forth in Schedule 12.5(c), the tangible Assets of
the Borrower are serviceable or in good working order taken as a whole, and
suitable for use in accordance with the practices of the Borrower.
(S) 12.6. Financial Statements and Condition. (a) Except as
----------------------------------
disclosed on Schedule 12.6 hereto, to the best of the Borrower's knowledge, the
audited financial statements of CSCI and its Subsidiaries as at and for the
period ended December 31, 1992, including the related schedules and notes,
certified by Meek & McLeod present fairly in accordance with GAAP (i) the
financial position of the Transferors as of the date of such balance sheet and
(ii) the results of operations of the Transferors for such period. Except as
disclosed on Schedule 12.6 hereto, to the best of the Borrower's knowledge, (x)
the Transferors had no material direct or indirect contingent liabilities as of
such date which are not reserved for in such balance sheet or which in
accordance with GAAP would have to be included in footnotes to such balance
sheet except to the extent of those disclosed in the foregoing audited financial
statements of CSCI and its Subsidiaries as of and for the period ended December
31, 1992 and (y) all such financial statements have been prepared in accordance
with GAAP applied on a basis consistently maintained throughout the period
involved.
(b) Except as disclosed on Schedule 12.6 hereto, to the best of the
Borrower's knowledge, the unaudited financial statements of CSCI and its
Subsidiaries as at and for the period ended September 30, 1993, including the
related schedules and notes, present fairly in accordance with GAAP (i) the
financial position of the Transferors as of the date of such balance sheet and
(ii) the results of operations of the Transferors for the period then ended,
and, except as set forth on Schedule 12.6 hereto, there has been no change in
the business or operations of the Transferors since December 31, 1992 that could
have a Material Adverse Effect; provided, however, that on and after the date of
delivery of the updated financial statements pursuant to Section 9.1, each
reference in this Section 12.6(b) to the financial statements of CSCI and its
Subsidiaries shall mean and be a reference to such updated financial statements
of the Borrower and each reference to Schedule 12.6 shall mean and be a
reference to the new Schedule 12.6 delivered pursuant to Section 9.1.
(c) Except as disclosed in the pro forma financial statements of the
Borrower previously delivered to the Agent, the Borrower had no liabilities,
contingent or otherwise, immediately prior to the Comcast Acquisition, except
arising from or relating to the transactions contemplated under Comcast Purchase
Agreement or in respect of the financing thereof. The Agent has been furnished
a pro forma balance sheet of the Borrower and its Subsidiaries taking into
account all transactions contemplated hereby, the Comcast Acquisition and the
financing thereof. Upon giving effect to the Comcast Acquisition, none of the
Credit Parties will have any material liabilities, contingent or otherwise,
which are not referred to in such balance sheet or in the notes thereto and
which are required to be disclosed therein in accordance with GAAP.
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(d) Except as disclosed on Schedule 12.6 hereto, the Agent has been
furnished projections of the future performance of the Borrower and its
Subsidiaries. The projections and pro forma financial information contained in
such materials are based upon good faith estimates and assumptions believed by
the Borrower to be reasonable at the time made, it being recognized by the
Lenders that such projections as to future events are not to be viewed as facts
and that actual results during the period or periods covered by such projections
may differ from the projected results.
(e) Except as disclosed on Schedule 12.6 hereto, no fact is known to
any Credit Party which would have a Material Adverse Effect that has not been
set forth in the financial statements referred to in Section 12.6(a), (b) or (c)
or disclosed herein or in the schedules attached to the Comcast Purchase
Agreement or otherwise disclosed to the Agent in writing prior to the New
Closing Date.
(S) 12.7. Intellectual Property. Except as listed on Schedule 12.7
---------------------
hereto, the Borrower and each of the other Credit Parties possesses all the
Intellectual Property and all other trademarks, trade names, copyrights,
patents, licenses or rights in any thereof (including, without limitation, those
listed on Schedule 12.7 hereto) which are adequate for the conduct of its
business.
(S) 12.8. Tax Liability. Each of the Credit Parties and their
-------------
respective Subsidiaries has filed all tax returns which are required to be
filed, and, except as otherwise permitted by Section 9.2 hereof, has paid all
taxes which have become due pursuant to such returns or pursuant to any
assessment received by it.
(S) 12.9. Governmental Action. No action of, or filing with, any
-------------------
governmental or public body or authority (other than normal reporting
requirements or filing as to Collateral under the provisions of Section 5
hereof) is required to authorize, or is otherwise required in connection with,
the execution, delivery or performance of this Agreement, the Security
Documents, the Guaranties, the Notes, the other Loan Documents, the Purchase
Documents, the Guaranteed Loan Documents or any of the instruments or documents
to be delivered pursuant hereto or thereto, except such as have been made or
will be made as contemplated by such agreements.
(S) 12.10. Disclosure. Neither the Schedules hereto, nor the
----------
financial statements referred to in Section 12.6(a), (b) and (c) hereof, nor the
certificates, statements, reports or other documents furnished to any Lender or
the Agent by or on behalf of any of the General Partners or the Credit Parties
in connection herewith or in connection with any transaction contemplated
hereby, nor this Agreement or any other Loan Document, Purchase Document or
Guaranteed Loan Document, at the time furnished, contains any untrue statement
of a material fact or omits to state any material fact (in each case, known to
any such Person in the case of any document not prepared by it) necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances in which the same were made.
(S) 12.11. Regulation U. None of the Credit Parties or any of their
------------
respective Subsidiaries owns any "margin stock" as such term is defined in
Regulation U, as amended (12
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C.F.R. Part 221), of the Board. The proceeds of the borrowings made hereunder
will be used only for the purposes set forth in Section 8 hereof. None of the
proceeds will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin stock or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry margin stock or
for any other purpose which might constitute the Loans under this Agreement a
"purpose credit" within the meaning of said Regulation U or Regulation X (12
C.F.R. Part 224) of the Board. None of the Credit Parties or any of their
respective Subsidiaries or any agent acting in its behalf has taken or will take
any action which is reasonably likely to cause this Agreement or any of the
documents or instruments delivered pursuant hereto to violate any regulation of
the Board or to violate the Securities Exchange Act of 1934 or any applicable
state securities laws.
(S) 12.12. Investment Company. None of the Credit Parties or any of
------------------
their respective Subsidiaries is an "investment company," or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended (15 U.S.C. (S)(S) 80a-1, et seq.). None of the transactions
contemplated by this Agreement, the other Loan Documents, the Subordinated Loan
Documents, the Purchase Documents or the Guaranteed Loan Documents will violate
such Act.
(S) 12.13. Employee Benefit Plans. (a) None of the Credit Parties
----------------------
maintains or contributes to any Employee Plan, other than those listed on
Schedule 12.13 hereto as such Schedule may be modified in the future with
respect to Plans other than those subject to Title IV of ERISA. No ERISA
Affiliate maintains or contributes to an Employee Plan which is a "defined
benefit plan" (within the meaning of Section 414(j) of the Code), other than
those listed on Schedule 12.13 hereto as such Schedule may be modified in the
future. No prohibited transaction (within the meaning of Section 406 of ERISA
and Code Section 4975) has occurred with respect to any Employee Plan which
would subject the Borrower or any Credit Party to a material civil penalty under
Section 502(i) of ERISA or material tax under Section 4975 of the Code.
(b) All of the Employee Plans which are maintained by the Credit
Parties comply (or will comply by the time required under Section 401(b) of the
Code) currently both as to form and operation, in all material respects, with
their terms and with the provisions of ERISA and the Code, and all other
applicable laws, rules and regulations. Each such Employee Plan which is
intended to be qualified under Code Section 401(a), has received a favorable
determination letter from the IRS with respect to its initial and/or continuing
qualification, and the trusts created thereunder have been determined to be
exempt from tax under the provisions of Code Section 501. Nothing has occurred
which has affected or is likely to adversely affect such qualification.
(c) Assuming for purposes of this representation that neither MLP nor
CCI is an ERISA Affiliate of the Borrower, the amount for which any Credit Party
or any ERISA Affiliate of the Borrower would be liable pursuant to the
provisions of Sections 4062, 4063 or 4064 of ERISA would be zero if each Pension
Benefit Plan is terminated.
(d) As of the New Closing Date, and during the preceding five years,
neither any Credit Party nor any ERISA Affiliate is now, or has been during the
preceding five years, a contributing employer to a "Multiemployer Plan" other
than those listed on Schedule 12.13 hereto. As of the New Closing Date, neither
any Credit Party nor any of their respective ERISA Affiliates has (i) withdrawn
as a substantial employer so as to become liable for withdrawal
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liability under the provisions of Section 4063 of ERISA, (ii) ceased making
contributions to any Pension Benefit Plan subject to the provisions of Section
4064(a) of ERISA to which any Credit Party or any ERISA Affiliate made
contributions during any of the five years prior to the New Closing Date, but
only to the extent that the PBGC determines that there is liability with respect
to such withdrawal and such liability is material, (iii) with respect to the
Credit Parties or any ERISA Affiliate of Borrower, incurred or caused to occur a
"complete withdrawal" (within the meaning of Section 4203 of ERISA) or a
"partial withdrawal" (within the meaning of Section 4205 of ERISA) from a
Multiemployer Plan so as to incur material withdrawal liability under Section
4201 of ERISA (after giving effect to any subsequent reduction or waiver of such
liability under Sections 4207 or 4208 of ERISA), or (iv) except as set forth in
Schedule 12.13, been a party to any transaction or agreement under which the
provisions of Section 4204 of ERISA were applicable. As of the New Closing Date
and during the preceding five years, no Pension Benefit Plan has incurred an
ERISA Event, nor has any material accumulated funding deficiency (as defined in
Section 412(a) of the Code) been incurred, nor has any funding waiver from the
Internal Revenue Service been received or requested with respect to any Pension
Benefit Plan.
(e) As of the New Closing Date, and during the preceding five years,
no notice of intent to terminate a Pension Benefit Plan under the termination
provisions of Section 4041(c) of ERISA has been filed by any of the Credit
Parties or any ERISA Affiliate.
(f) As of the New Closing Date, and during the preceding five years,
the PBGC has not instituted proceedings to terminate (or appoint a trustee to
administer) a Pension Benefit Plan maintained for employees of any of the Credit
Parties or any ERISA Affiliate and to the knowledge of any of the Credit
Parties, no event has occurred or condition exists which might constitute
grounds under the provisions of Section 4042 of ERISA for the termination of (or
the appointment of a trustee to administer) any such Pension Benefit Plan.
(g) The assets of each Pension Benefit Plan maintained by the Credit
Parties are at least equal to the present value of the "benefit liabilities"
(within the meaning of Section 4001(a)(16) of ERISA) under such Pension Benefit
Plan, in each case as of the latest actuarial valuation date for such Pension
Benefit Plan (determined in accordance with the same actuarial assumptions and
methods as those used by such Pension Benefit Plan's actuary in its valuation of
such Plan as of such valuation date).
(h) Except as otherwise listed on Schedule 12.13 hereto, as of the
New Closing Date, the assets of each Pension Benefit Plan maintained or
contributed to by an ERISA Affiliate of CCI and of MLP are at least equal to the
present value of the "benefit liabilities" (within the meaning of Section
4001(a)(16) of ERISA) under such Pension Benefit Plan, in each case as of the
latest actuarial valuation date for such Pension Benefit Plan (determined in
accordance with the same actuarial assumptions and methods as those used by such
Pension Benefit Plan's actuary in its valuation of such Plan as of such
valuation date).
(i) There are no actions, suits or claims pending (other than routine
claims for benefits) that, to the knowledge of any Credit Party, could
reasonably be expected to be asserted against any Employee Plan maintained by a
Credit Party or against the assets of any such Employee Plan maintained by a
Credit Party. Other than routine claims for benefits, no civil or criminal
action brought pursuant to the provisions of ERISA is pending or (as to the
matters with
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respect to the Comcast Acquisition, to the best knowledge of the Borrower)
threatened against any fiduciary or any Employee Plan which is maintained by any
Credit Party.
(j) Except as otherwise listed on Schedule 12.13 hereto, as of the
New Closing Date, the amount for which any ERISA Affiliate of CCI or MLP would
be liable pursuant to the provisions of Section 4062, 4063 or 4064 of ERISA
would be zero if each Pension Benefit Plan is terminated.
(k) Except as otherwise listed on Schedule 12.13 hereto, as of the
New Closing Date, none of the ERISA Affiliates of CCI or MLP has incurred a
"complete withdrawal" (within the meaning of Section 4203 of ERISA) or a
"partial withdrawal" (within the meaning of Section 4205 of ERISA) from a
Multiemployer Plan.
(S) 12.14. Comcast Acquisition. The Comcast Acquisition has been
-------------------
duly and validly consummated, without modification, amendment or waiver (except
as approved in writing by the Agent), in accordance with the terms, conditions
and provisions of the Comcast Purchase Agreement and the other Comcast Purchase
Documents and in conformity with all applicable laws and regulations of the
United States, each state thereof and each subdivision of any such state, except
where non-conformity therewith would not have a Material Adverse Effect.
(S) 12.15. FCC Compliance. (a) The Borrower (and, as the case may
--------------
be, its FCC Affiliates) have obtained all necessary Governmental Permits to own
and operate all Multiple Address System ("MAS") microwave radio stations and all
other stations licensed by the FCC to MLP Communications Company or to any of
its FCC Affiliates that the Borrower owns and operates from time to time, and
all such Governmental Permits necessary or advisable to operate the business of
the Borrower (both prior and subsequent to the consummation of the Comcast
Acquisition) are in full force and effect (except to the extent the loss of such
Governmental Permits would not have a Material Adverse Effect) and listed on
Schedule 12.15 attached hereto.
(b) All of MLP Communication Company's MAS microwave radio stations
and all other stations licensed by the FCC to MLP Communication Company or to
any of the FCC Affiliates are operated in compliance in all material respects
with all terms and conditions of their respective Governmental Permits and all
applicable Governmental Rules, except to the extent any such non-compliance
would not have a Material Adverse Effect. All other personal property of the
Borrower and its FCC Affiliates that transmits or receives radio frequency
energy or waves is operated by the Borrower (or, as the case may be, by its FCC
Affiliates) in compliance in all material respects with all applicable
Governmental Rules including, without limitation, the Communications Act and the
FCC Rules.
(c) The Borrower has no knowledge of any reason for the FCC to revoke
or to fail to renew any of MicroSpace's FCC Licenses in the ordinary course and
without any condition that could adversely affect MicroSpace or the continued
ability of MicroSpace to provide Channel Capacity to the Borrower or otherwise
have a Material Adverse Effect.
(d) The Channel Capacity Providers are licensed by the FCC to own and
operate the radio broadcast and other stations, which they operate and by means
of which they provide Channel Capacity to the Borrower and/or to its FCC
Affiliates, in the communities in which they
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are broadcasting or transmitting radio frequency energy or waves and are
operating their stations in conformity in all material respects with the
Communications Act and the FCC Rules (except to the extent such non-conformity
would not have a Material Adverse Effect).
(e) To the knowledge of the Borrower, neither MicroSpace nor any
other Channel Capacity Provider material to the operations of the Borrower (both
prior and subsequent to the consummation of the Comcast Acquisition) is a
subject of any investigation, notice of violation, order or complaint issued by
or before any Governmental Body, including the FCC, or of any other proceedings
which could threaten or adversely affect the validity or the continued
effectiveness of (i) any of the licenses and authorizations issued by the FCC
and held by any of the Channel Capacity Providers; or (ii) the leases of
MicroSpace for satellite transponder capacity.
(S) 12.16. Permits, Etc. (a) Except as listed on Schedule 12.16
-------------
hereof (and as to the Comcast Assets, to the best knowledge of the Borrower),
each Credit Party and each Subsidiary thereof possesses all material permits,
licenses, approvals and consents of Federal, state and local governments and
regulatory authorities required to conduct properly its business substantially
as presently conducted and proposed to be conducted.
(b) Except as listed on Schedule 12.16 hereof (and as to the Comcast
Assets, to the best knowledge of the Borrower), each such material permit,
license, approval and consent is and will be in full force and effect, and no
event has or shall have occurred which permits (or with the passage of time
would permit) the revocation or termination of any such permit, license,
approval or consent or the imposition of any restriction thereon of such nature
as may materially limit the operation of the business covered thereby.
(c) Except as listed on Schedule 12.16 hereof (and as to the Comcast
Assets, to the best knowledge of the Borrower), all material approvals,
applications, filings, registrations, consents or other actions required of any
local, state or Federal authority to enable each Credit Party and the
Subsidiaries thereof to exploit any such material permit, license, approval or
consent has been obtained or made.
(d) Except as listed on Schedule 12.16 hereof, no Credit Party nor
any Subsidiary of any Credit Party (i) is in violation of any duty or obligation
required by law or any rule or regulation applicable to the operation of any of
its businesses, which violation could reasonably be expected to have a Material
Adverse Effect, or (ii) has received any notice from the granting body or any
other governmental authority with respect to any material breach of any covenant
under, or any material default with respect to, any such permit, license,
approval or consent.
(e) Except as listed on Schedule 12.16 hereof, before and upon giving
effect to this Agreement, the Notes, the other Loan Documents and the Guaranteed
Loan Documents, no material default shall have occurred and be continuing under
any such permit, license, approval or consent.
(f) Except as listed on Schedule 12.16 hereof, all consents and
approvals of, filings and registrations with, and all other actions in respect
of, all governmental agencies, authorities or instrumentalities required to
maintain any such material permit, license, approval or consent in full force
and effect prior to the scheduled date of expiration thereof has been, or,
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prior to the time when required, will have been, obtained, given, filed or taken
and are or will be in full force and effect.
(g) Except as listed on Schedule 12.16 (and as to the Comcast Assets,
to the best knowledge of any Credit Party or Subsidiary thereof), there is not
pending, or, to the best knowledge of the Borrower, threatened, any action to
revoke, cancel, suspend, modify or refuse to renew any material permit, license,
approval or consent and each business covered by each such permit, license,
approval or consent is being operated in all material respects in compliance
with such permit, license, approval or consent.
(h) There is not (and as to the Comcast Assets, to the best knowledge
of the Borrower) now issued or outstanding or, to the best knowledge of the
Borrower, threatened, any notice of any hearing, violation or complaint against
such Credit Party or Subsidiary thereof with respect to any such material
permit, license, approval or consent and no Credit Party or Subsidiary thereof
has any knowledge that any Person intends to contest the renewal of any such
permit, license, approval or consent.
(S) 12.17. Environmental Status. (a) Except as disclosed on
--------------------
Schedule 12.17 hereto (and as to the Comcast Assets, to the best knowledge of
the Borrower), none of the Credit Parties or any of their respective
Subsidiaries is in material violation of any applicable Environmental Law, nor,
to the best knowledge of the Borrower, are any of the Credit Parties or any of
their respective Subsidiaries under investigation or under review by any
Governmental Body with respect to compliance therewith or with respect to the
generation, use, treatment, storage or Release of any Hazardous Material.
(b) Except as disclosed on Schedule 12.17 hereto (and as to the
Comcast Assets, to the best knowledge of the Borrower), none of the Credit
Parties nor any of their respective Subsidiaries has any material liability or
contingent or potential material liability in connection with the past
generation, use, treatment, storage, or Release of any Hazardous Material.
(c) To the best knowledge of the Borrower, except as disclosed on
Schedule 12.17 hereto, there has heretofore been no Release of any such
Hazardous Material on, under or about or about any property owned, leased or
operated by any Credit Party or any Subsidiary that may pose any material risk
to safety, health, or the environment, or that is defined or regulated as a
hazardous, toxic or dangerous waste or other substance under any Environmental
Law.
(S) 12.18. Validity of Receivables. (a) Each Eligible Receivable
-----------------------
existing on the New Closing Date is, and each future Eligible Receivable will
be, at the time of its creation, a genuine obligation enforceable against the
account debtor thereof in accordance with its terms, and represents an
undisputed and bona fide indebtedness owing to the Borrower by an account
debtor, without defense, setoff or counterclaim, free and clear of all Liens
other than the security interest in favor of the Agent under the Security
Documents; and no payment has been received with respect to any Eligible
Receivable and no Eligible Receivable is subject to any credit or extension or
agreement therefor.
(b) No Eligible Receivable is evidenced by any note, draft, trade
acceptance or other instrument for the payment of money.
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(S) 12.19. Representations and Warranties in Other Documents. All
-------------------------------------------------
representations and warranties of the Borrower contained in the Subordinated
Loan Documents and the Guaranteed Loan Documents and all representations and
warranties of the Borrower and, to the best knowledge of the Borrower, of the
Transferors, contained in the Comcast Purchase Agreement are true and correct in
all material respects on and as of the date of the initial borrowing hereunder
as though made on and as of such date. To the best knowledge of the Borrower,
all representations and warranties of MLP and CCI, as applicable, in the Put and
Call and the Guaranteed Loan Guarantees are true and correct in all material
respects on and as of the date of the initial borrowing hereunder as though made
on and as of such date.
SECTION 13. MISCELLANEOUS
(S) 13.1. Collection Costs. In the event that the Agent (or, upon an
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Event of Default, any Lender) shall retain an attorney or attorneys to collect,
enforce, protect, maintain, preserve or foreclose its interests with respect to
this Agreement, the Loans, the Notes, any other Loan Documents, the Guaranteed
Loan Documents, any Lender Debt, any Receivable or the Lien on any Collateral or
any other security for the Lender Debt or under any instrument or document
delivered pursuant to this Agreement, or in connection with any Lender Debt, or
to protect the rights of any holder or holders with respect thereto, each of the
Credit Parties shall, jointly and severally, pay all of the reasonable costs and
expenses of such collection, enforcement, protection, maintenance, preservation
or foreclosure, including reasonable attorneys' fees, which amounts shall be
part of the Lender Debt, and such Lender or the Agent may take judgment for all
such amounts. The attorney's fees arising from such services, including those
of any appellate proceedings, and all expenses, costs, charges and other fees
incurred by such counsel in any way or with respect to or arising out of or in
connection with or relating to any of the events or actions described in this
Section 13.1 shall be payable by the Credit Parties to the Agent (and, upon an
Event of Default, also to the Lenders, as the case may be) on demand (with
interest accruing from the tenth Business Day following the earlier of (i) the
date of such demand, and (ii) the date such payment became due, assuming such
payment became due without demand), and shall be additional obligations under
this Agreement. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include: recording costs, appraisal costs, paralegal
fees, costs and expenses; accountants' fees, costs and expenses; court costs and
expenses; photocopying and duplicating expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges; telegram
charges; telecopier charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with the performance of
such legal services.
(S) 13.2. Amendment, Modification and Waiver. (a) No amendment,
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modification or waiver of any provision of the Loan Documents and no consent by
the Agent or the Lenders to any departure therefrom by any of the Credit Parties
shall be effective unless such amendment, modification or waiver shall be in
writing and signed by a duly authorized officer of the appropriate Credit Party,
the Agent, the Lenders or the Majority Lenders, as the case may be (as more
fully described below), and the same shall then be effective only for the period
and on the conditions and for the specific instances and purposes specified in
such writing.
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(b) No notice to or demand on any of the Credit Parties in any case
shall entitle any of the Credit Parties to any other or further notice or demand
in similar or other circumstances.
(c) Any term or provision of any Loan Document may be amended or
modified and the observance of any provision of any Loan Document may be waived
with the written consent of the Credit Parties being a party to such Loan
Document and the Majority Lenders; provided, however, that no such amendment,
modification or waiver shall, without the prior written consent of the Agent,
amend or waive any of the provisions of Section 2.15, 3.5, 3.6, 3.7, 13.5,
13.13, 13.14, 13.15 or 13.17 hereof, or otherwise change any of the rights or
obligations of the Agent under any of the Loan Documents; provided, further,
that no amendment, modification or waiver of any of the provisions of Section 4,
13.14, 13.15 or 13.17 hereof shall be effective without the prior written
consent of the Agent and, in the case of any amendment to Section 4 hereof which
adversely affects any Issuing Lender, with the prior written consent of such
Issuing Lender; and provided, further, that no such amendment, modification or
waiver shall, without the prior written consent of all of the Lenders:
(i) extend the due date of the principal of or interest on any
Loan or any other amount payable hereunder, or portion thereof, change the
rate of interest on any Loan, or portion thereof, or reduce the amount of
any principal payable on any Loan, or portion thereof, or reduce the fees
payable to the Lenders hereunder or extend the time of payment thereof;
(ii) substitute, discharge, release or surrender any material
portion of the Collateral or use any portion of the Collateral to secure
any Indebtedness for Borrowed Money other than Lender Debt, except as
permitted in such Loan Document (it being understood that a release of
Collateral under circumstances where the Net Proceeds of the disposition of
such Collateral are applied to Lender Debt shall not require unanimous
consent, but shall be governed under Section 3.1 or Section 10.5 hereof, as
applicable) or amend the terms of any Guaranty or release any such
Guaranty;
(iii) except as provided in Section 13.14 hereof, change the
dollar amount or percentage of the Revolving Commitment or Term Loan
Commitment of any Lender;
(iv) modify any provision of this Section 13.2 or any other
provision which expressly requires the consent of all Lenders;
(v) amend the definition of "Majority Lenders"; or
(vi) amend Section 11.5 hereof.
The Agent, the Lenders other than UBS, and the Credit Parties hereby agree to
cooperate with UBS to effectuate the provisions of Section 13.14 hereof,
including, without limitation, with respect to the execution of one or more
amendments of this Agreement or any other Loan Document so long as such
amendments result in no substantive effect to the terms hereof.
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(S) 13.3. New York Law. THIS AGREEMENT AND THE NOTES SHALL BE
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CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(S) 13.4. Notices. All notices, requests, demands or other
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communications provided for herein shall be in writing (unless otherwise
expressly provided herein) and shall be deemed to have been given (a) if by
registered or certified mail, return receipt requested, four Business Days
following the date when sent, (b) if by telex, when sent and answerback
received, (c) if by overnight courier, when received, (d) if by telecopier, when
sent and confirmed, or (e) if personally delivered or delivered by messenger,
when receipted for, in each case, addressed to the Borrower or to the Agent or
any Lender, at its respective office under its name on the signature pages of
this Agreement and to the attention of the Person so designated, or to such
Person or address as any party hereto shall designate to the other from time to
time in writing forwarded in like manner.
(S) 13.5. Fees and Expenses. (a) Whether or not any Loans or other
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financial accommodations are made hereunder, the Borrower shall pay (within ten
Business Days of presentment thereunder) all expenses paid or incurred by the
Agent in connection with the transactions contemplated hereunder and under the
Purchase Documents including but not limited to appraisal fees, title insurance
fees, audit fees, recording fees, computer fees, duplication fees, telephone and
telecopier fees, travel and transportation fees, search and filing fees, and the
reasonable fees and expenses of Messrs. Kaye, Scholer, Fierman, Hays & Handler,
special counsel to the Agent, and all local counsel to the Agent. Such expenses
shall also include, without limitation, any costs paid or incurred by the Agent
in connection with any waivers, amendments, modifications, extensions, renewals,
renegotiations or "work-outs" of this Agreement, any other Loan Document or
other any instrument or document delivered in connection herewith or therewith,
and any consents or approvals provided hereunder or thereunder or otherwise
requested by any Credit Party. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: recording costs,
appraisal costs, paralegal fees, costs and expenses; accountants' fees, costs
and expenses; photocopying and duplicating expenses; long distance telephone
charges; air express charges; telegram charges; telecopier charges; secretarial
overtime charges; and expenses for travel, lodging and food paid or incurred in
connection with the performance of such legal services.
(S) 13.6. Stamp or Other Tax. Should any stamp or excise tax become
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payable in respect of this Agreement, any Note, any other Loan Document, the
Lender Debt, the Collateral or any modification hereof or thereof, each of the
Credit Parties shall pay, the liability of which is joint and several, the same
(including interest and penalties, if any) and shall hold the Lenders and the
Agent harmless with respect thereto.
(S) 13.7. Waiver of Jury Trial and Setoff. In any litigation in any
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court with respect to, in connection with, or arising out of this Agreement, any
of the Advances, any of the Notes or other Loan Documents, the Collateral, or
any instrument or document delivered pursuant to this Agreement, or the
validity, protection, interpretation, collection or enforcement thereof, or any
other claim or dispute howsoever arising, between any Credit Parties and the
Lenders or the Agent, EACH LENDER AND EACH CREDIT PARTY HEREBY, to the fullest
extent it may effectively do so, (a) waives the right to interpose any setoff,
recoupment,
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counterclaim or cross-claim in connection with any such litigation, irrespective
of the nature of such setoff, recoupment, counterclaim or cross-claim, unless
such setoff, recoupment, counterclaim or cross-claim could not, by reason of any
applicable Federal or State procedural laws, be interposed, pleaded or alleged
in any other action and (b) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH
LITIGATION. EACH OF THE CREDIT PARTIES AGREES THAT THIS SECTION 13.7 IS A
SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT THE LENDERS
WOULD NOT EXTEND TO THE BORROWER ANY FINANCIAL ACCOMMODATIONS HEREUNDER IF THIS
SECTION 13.7 WERE NOT PART OF THIS AGREEMENT.
(S) 13.8. Termination of Agreement. (a) The Agent on behalf of the
------------------------
Lenders shall have the right to, upon the direction of the Majority Lenders,
terminate this Agreement immediately, at any time, during the continuance of an
Event of Default under Section 11 hereof.
(b) The Borrower may terminate this Agreement at any time when either
(x) no Letters of Credit are outstanding, or (y) the Borrower has provided
Letter of Credit Cash Collateral in an amount equal to the undrawn amount of all
Letters of Credit, in each case upon not less than ten days' prior Written
Notice (which shall be irrevocable) to the Agent (which shall promptly notify
each Lender thereof in writing or by telephone confirming immediately in
writing) of termination and by prepaying the Loans in whole, terminating the
Commitments and paying all other amounts payable hereunder and all applicable
penalties, fees, charges, premiums and costs, all as provided hereunder.
(c) The termination of this Agreement shall not affect any rights of
the Credit Parties, the Lenders or the Agent or any obligation of any of the
Credit Parties, the Lenders or the Agent to the others, arising on or prior to
the effective date of such termination, and the provisions hereof shall continue
to be fully operative until all Lender Debt of the Credit Parties and their
Subsidiaries hereunder incurred on or prior to such termination have been paid
and performed in full.
(d) Upon the giving of notice of termination of this Agreement, all
Lender Debt shall be due and payable on the date of termination specified in
such notice.
(e) The Liens and rights granted to the Agent on behalf of the Agent
and the Lenders hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Lender Debt
has been paid in full.
(f) All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof by acceleration
under Section 11 hereof unless otherwise provided.
(g) Notwithstanding the foregoing, if after receipt of any payment of
all or any part of the Lender Debt, the Agent or any Lender is for any reason
compelled to surrender such payment to any Person or entity because such payment
is determined to be void or voidable as a preference, an impermissible setoff, a
diversion of trust funds or for any other reason, this Agreement shall continue
in full force, and the Credit Parties, as appropriate, shall be liable to, and
shall indemnify and hold such Lender or the Agent harmless for, the amount of
such payment
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surrendered until such Lender or the Agent, as the case may be, shall have been
finally and irrevocably paid in full. The provisions of the foregoing sentence
shall be and remain effective notwithstanding any contrary action which may have
been taken by the Lenders or the Agent in reliance upon such payment, and any
such contrary action so taken shall be without prejudice to the Lenders' or the
Agent's rights under this Agreement and shall be deemed to have been conditioned
upon such payment having become final and irrevocable.
(h) All indemnities provided for under this Agreement and the other
Loan Documents, including, without limitation, under Sections 2.15 and 13.5,
shall survive the termination of this Agreement and the payment in full of the
Lender Debt.
(S) 13.9. Captions. The captions of the various Sections and
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paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
(S) 13.10. Lien; Setoff by Lenders. Each of the Credit Parties
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hereby grants to each Lender and the Agent a continuing Lien for all Lender Debt
upon any and all monies, securities and other property of such Credit Party and
the proceeds thereof, now or hereafter held or received by, or in transit to,
such Lender or the Agent from or for such Credit Party, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, and also upon any and
all deposits (general or special) and credits of such Credit Party with, and any
and all claims of such Credit Party against, any Lender or the Agent, at any
time existing (which shall constitute part of the Collateral). Upon the
occurrence and during the continuance of an Event of Default, each Lender and
the Agent is hereby authorized at any time and from time to time, without notice
to such Credit Party, to setoff, appropriate and apply any or all items
hereinabove referred to against all Lender Debt. After any such setoff by the
Agent or any Lender, the Agent or such Lender shall notify the Credit Party
against which it setoff of the exercise by it of such right of setoff, provided,
that the failure of the Agent or such Lender to so notify such Credit Party
shall not affect the validity of such setoff or create a cause of action against
the Agent or such Lender.
(S) 13.11. Payment Due On Non-Business Day. Whenever any payment to
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be made hereunder or under any other Loan Document or on the any Advance shall
be stated to be due and payable, or whenever the last day of any Interest Period
would otherwise occur, on a day which is not a Business Day, such payment shall
be made and the last day of such Interest Period shall occur on the next
succeeding Business Day and such extension of time shall in such case be
included in computing interest on such payment; provided, however, if such
extension would cause a payment of a Eurodollar Advance to be made, or the last
day of such Interest Period for a Eurodollar Advance to occur, in the next
following calendar month, such payment shall be made and the last day of such
Interest Period shall occur on the next preceding Business Day.
(S) 13.12. Service of Process. Each of the Credit Parties hereby
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irrevocably consents to the jurisdiction of the courts of the State of New York
and of any Federal Court located in the City of New York in connection with any
action or proceeding arising out of or relating to this Agreement, any Guaranty,
any of the Security Documents, all or any of the Lender Debt, the Collateral,
all or any of the Notes, any other Loan Document or any document
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or instrument delivered pursuant to this Agreement. In any such litigation, each
of the Credit Parties waives, to the fullest extent it may effectively do so,
personal service of any summons, complaint or other process and agrees that the
service thereof may be made by certified or registered mail directed to the
Borrower at its address set forth in Section 13.4 hereof. Each of the Credit
Parties hereby waives, to the fullest extent it may effectively do so, the
defenses of forum non conveniens and improper venue.
(S) 13.13. Union Bank of Switzerland, New York Branch, as Agent. (a)
----------------------------------------------------
Each Lender hereby irrevocably designates and appoints UBS as the agent of such
Lender under each of the Loan Documents in which UBS is named as agent, and each
such Lender hereby irrevocably authorizes UBS, as the agent for such Lender, to
take such action on behalf of each Lender under the provisions of the Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of the Loan Documents, together with such
other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in the Loan Documents, the Agent shall not
have any duties or responsibilities except those expressly set forth in the Loan
Documents, nor any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into the Loan Documents or otherwise exist against the Agent.
(b) The Agent may execute any of its duties under the Loan Documents
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Agent shall not
be responsible for the negligence or misconduct of any agents or attorneys-in-
fact selected by it with reasonable care.
(c) Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with the Loan Documents (except for its or such Person's own gross
negligence or wilful misconduct), or (ii) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by any
of the Credit Parties or any of their respective Subsidiaries or any officer
thereof contained in the Loan Documents or in any certificate, report, statement
or other document referred to or provided for in, or received by the Agent under
or in connection with the Loan Documents, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of the Loan Documents
or for any failure of any of the Credit Parties or any of their respective
Subsidiaries to perform its obligations under the Loan Documents. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, the Loan Documents, or to inspect the properties, books or
records of any of the Credit Parties or any of their respective Subsidiaries.
(d) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation reasonably believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Credit Parties), independent accountants and
other experts selected by the Agent. The Agent may deem and treat the payee of
any Note as the owner thereof for all
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purposes unless a Written Notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent.
(e) The Agent shall be fully justified in failing or refusing to take
any action under the Loan Documents unless it shall first receive such advice or
concurrence of the Majority Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under the Loan Documents in accordance with a request
of the Majority Lenders (or where required by the terms of this Agreement, the
Lenders), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Notes.
(f) The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent shall
have received notice from a Lender or one of the Credit Parties referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Majority Lenders; provided, that, unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
(g) Each Lender expressly acknowledges that neither the Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of any of the Credit
Parties or any of their respective Subsidiaries, shall be deemed to constitute
any representation or warranty by the Agent to any Lender. Each Lender
represents to the Agent that it has, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of each of the Credit Parties and their respective
Subsidiaries, and made its own decision to make its loans hereunder and enter
into this Agreement. Each Lender also represents that it will, independently
and without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, operations, liabilities, assets,
properties and condition (financial or otherwise) and creditworthiness of each
of the Credit Parties and their respective Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of any
of the Credit Parties or any of their respective Subsidiaries which may come
into the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
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(h) Each Lender agrees to indemnify the Agent in its capacity as such
(to the extent not reimbursed by the Credit Parties and without limiting the
obligation of the Credit Parties to do so), ratably according to such Lender's
aggregate Revolving Commitments and Term Loan Commitments percentage set forth
opposite its name on Schedule 2.2 hereto from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following the payment of the Notes) be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of the Loan Documents, the Purchase Documents or the transactions
contemplated thereby or any action taken or omitted by the Agent under or in
connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or wilful misconduct. The
agreements in this Section 13.13(h) shall survive the payment of the Notes and
the Lender Debt.
(i) The Agent and its Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Credit Parties as
though the Agent were not the Agent hereunder. With respect to its pro rata
share of the Revolving Advances made or renewed by it and any Note issued to it,
the Agent shall have the same rights and powers under this Agreement as any
Lender and may exercise the same as though it were not the Agent. The terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
(j) The Agent may resign as Agent upon thirty days' Written Notice to
the Lenders. In the event that the Agent shall enter receivership, then the
Lenders (other than the Lender which is an acting as Agent, if applicable) may
by unanimous consent of such Lenders, remove the or Agent under this Agreement.
If the Agent shall give a notice of its intention to resign as Agent under this
Agreement or the Agent shall be removed, then the Majority Lenders shall, within
such thirty-day period, appoint a successor agent for the Lenders, whereupon
such successor agent shall succeed to the rights, powers and duties of the
Agent, and the term "AGENT" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement or any holders of the Notes. After
any retiring Agent's resignation hereunder as Agent or any Agent's removal, the
provisions of this Section 13.13 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
(k) Each Lender agrees that (i) all Lender Debt of the Credit Parties
to each Lender under this Agreement and under the Notes rank pari passu in all
respects with each other, and (ii) if any Lender shall, through the exercise of
a right of banker's lien, setoff, counterclaim or otherwise, obtain payment with
respect to its Commitments which results in its receiving more than its pro rata
share of the Commitments of all Lenders, then (A) such Lender shall be deemed to
have simultaneously purchased from each of the other Lenders a share in the
Advances so that the amount of the Advances of all Lenders shall be pro rata and
(B) such other adjustments shall be made from time to time as shall be equitable
to insure that all Lenders share such payments ratably. If all or any portion
of any such excess payment is thereafter recovered from the Lender which
received the same, the purchase provided in this Section 13.13(k) shall be
deemed to have been rescinded to the extent of such recovery, without interest.
Each of the Credit Parties
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expressly consents to the foregoing arrangements and agrees that each Lender so
purchasing a portion of another Lender's Loan may exercise all rights of payment
(including, without limitation, all rights of setoff, banker's lien or
counterclaim) with respect to such portion as fully as if such Lender were the
direct holder of such portion.
(l) The Agent agrees that it shall promptly deliver to each Lender
copies of all notices, demands, statements and communications which the Agent
gives to the Credit Parties, except for routine notices of payments due under
the Loan Documents and other miscellaneous notices, demands, statements and
communications, which are not material to the interests of any Lender. The
Agent shall have no liability to any Lender, nor shall a cause of action arise
against the Agent, as a result of the failure of the Agent to deliver to any
Lender any such notice, demand, statement or communication.
(m) The Agent shall endeavor to exercise the same care in
administering the Loan Documents as it exercises with respect to similar
transactions in which it is involved and where no other co-lenders or
participants are involved; provided, that the liability of the Agent for failing
to do so shall be limited as provided in the preceding paragraphs of this
Section 13.13.
(n) (i) If at any time or times it shall be necessary or
prudent in order to conform to any law of any jurisdiction in which any of
the Collateral shall be located, or the Agent shall be advised by counsel,
that it is so necessary or prudent in the interest of the Lenders, or the
Agent shall deem it necessary for its own protection in the performance of
its duties hereunder, the Agent and (to the extent required by the Agent)
each Credit Party shall execute and deliver all instruments and agreements
reasonably necessary or proper to constitute another bank or trust company,
or one or more individuals approved by the Agent (to the extent necessary
or requested by the Agent) (each an "APPROVED DELEGATE"), either to act as
co-agent or co-agents or trustee of all or any of the Collateral, jointly
with the Agent originally named herein or any successor, or to act as
separate agent or agents or trustee of any such Collateral. In the event
that any of the Credit Parties shall not have joined in the execution of
such instruments or agreements with any Approved Delegate within thirty
Business Days after the receipt of a written request from the Agent to do
so, or in case an Event of Default shall have occurred and be continuing,
each of the Credit Parties hereby irrevocably appoints the Agent as its
agent and attorney to act for it under the foregoing provisions of this
Section 13.13(n) in such contingency.
(ii) Every separate agent and every co-agent and every trustee,
other than any agent which may be appointed as successor to the Agent,
shall, to the extent permitted by applicable law, be appointed to act and
be such, subject to the following provisions and conditions, namely:
(A) except as otherwise provided herein, all rights,
remedies, powers, duties and obligations conferred upon, reserved or
imposed upon the Agent in respect of the custody, control and
management of moneys, paper or securities shall be exercised solely by
the Agent hereunder;
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(B) all rights, remedies, powers, duties and obligations
conferred upon, reserved to or imposed upon the Agent hereunder shall
be conferred, reserved or imposed and exercised or performed by the
Agent except to the extent that the instrument appointing such
separate agent or separate agents or co-agent or co-agents or trustee
shall otherwise provide, and except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be
performed, the Agent shall be incompetent or unqualified to perform
such act or acts, in which event such rights, remedies, powers, duties
and obligations shall be exercised and performed by such separate
agents or co-agent or co-agents to the extent specifically directed in
writing by the Agent;
(C) no power given hereby to, or which it is provided
hereby may be exercised by, any such separate agent or separate agents
or co-agent or co-agents or trustee shall be exercised hereunder by
such separate agent or separate agents or co-agent or co-agents or
trustee except jointly with, or with the consent in writing of, the
Agent, anything herein contained to the contrary notwithstanding;
(D) no separate agent or co-agent or trustee constituted
under this Section 13.13(n) shall be personally liable by reason of
any act or omission of any other agent, separate agent, co-agent or
trustee hereunder; and
(E) the Agent, at any time by an instrument in writing,
executed by it, may accept the resignation of or remove any such
separate agent or co-agent or trustee, and in that case, by an
instrument in writing executed by the Agent and the Credit Parties (to
the extent necessary or requested by the Agent) jointly, may appoint a
successor to such separate agent or co-agent or trustee, as the case
may be, anything herein contained to the contrary notwithstanding. In
the event that any of the Credit Parties shall not have joined in the
execution of any such instrument with a Person or entity within ten
days after the receipt of a written request from the Agent to do so,
or in the case an Event of Default shall have occurred and be
continuing, the Agent, acting alone, may appoint a successor and may
execute any instrument in connection therewith, and the Credit Parties
hereby irrevocably appoint the Agent its agent and attorney to act for
it in such connection in either or such contingencies.
(S) 13.14. Sale, Assignment or Transfer to Additional Lenders. (a)
--------------------------------------------------
Without limiting any additional rights which UBS may have as a Lender under
Section 13.13 hereof and subject to the terms of Section 13.15 hereof, UBS may:
(i) in its individual capacity, from time to time sell, assign
or transfer one or more portions of its pro rata share of any Loan and/or
the Commitments to not more than five banks or other financial institutions
of its choosing, in its sole discretion (the "ADDITIONAL LENDERS"),
provided, that such Additional Lender shall not, on the date of such sale,
assignment or transfer, be subject to any taxes, duties or charges
reimbursable by the Borrower pursuant to Section 3.4 hereof with respect to
the interest so sold, assigned or transferred that are greater or more
burdensome than those taxes, duties or charges that UBS may be subject to
on such date with respect to the interest so sold,
128
<PAGE>
assigned or transferred, unless such Additional Lender waives its rights to
such increased reimbursement.
(ii) in the event of a sale, assignment or transfer in
accordance with the provisions of Section 13.14(a) or Section 13.15 hereof,
in its capacity as Agent and in accordance with Section 13.2 hereof,
execute one or more amendments of this Agreement or any other Loan Document
so that each Additional Lender shall be a named party thereof with all of
the rights and obligations of any Lender hereunder.
(b) Each Credit Party hereby agrees that it shall execute and
deliver, at the request of UBS:
(i) if part of UBS's pro rata share of any Loan and/or the
Commitments as to the Borrower is sold, assigned or transferred in
accordance with the provisions of Section 13.15 or 13.14(a) hereof to any
Lender or Additional Lender, to the extent requested by UBS, one or more
Notes to the order of UBS and such Lender and/or Additional Lender to
evidence the portions of the Advances retained and sold; and
(ii) any amendment to any Loan Document to effectuate this
Section 13.14 (without limiting the right of the Agent as set forth in
Section 13.2 to execute an amendment in connection with this Section
13.14). The terms "sale," "assignment" or "transfer" shall include a
novation or assumption by any Additional Lender of all or any portion of
the obligations and commitments of UBS hereunder.
(S) 13.15. Benefit of Agreement. (a) This Agreement shall be
--------------------
binding upon and inure to the benefit of the parties hereto, and their
respective successors and assigns, except that the obligation of the Lenders to
make Revolving Advances and other financial accommodations hereunder shall not
inure to the benefit of any successors and assigns of the Borrower.
(b) No Credit Party may assign or transfer any of its interest
hereunder without the prior written consent of the Lenders. Each of the Lenders
may make, carry or transfer its pro rata share of the Loans at, to or for the
account of any of its branch offices or the office of one or more of its
Affiliates, provided, that with respect to the making, carrying or transfer of a
Lender's pro rata share of the Loans as aforesaid such branch office or such
Affiliate or Affiliates, as the case may be, shall not, on the date of such
making, carrying or transfer of the Lender's pro rata share of the Loans, be
subject to any taxes, duties or charges reimbursable by the Borrower pursuant to
Section 3.4 hereof that are greater or more burdensome than those applicable
taxes, duties or charges to which the Lender was subject on such date with
respect thereto, unless such Lender waives its right to such increased
reimbursement.
(c) Each Lender may, with the prior written consent of the Agent,
assign its rights and delegate its obligations under this Agreement and may,
with the prior written consent of the Agent, assign, sell, or without the
consent of the Agent grant participation in, all or any part of its pro rata
share of the Loans or its Commitment or any other interest herein or in its
Notes to another bank or other entity, provided, that such bank or other entity
shall not, on the date of such assignment, sale, delegation or grant, be subject
to any taxes, duties or charges reimbursable by the Borrower pursuant to Section
3.4 hereof with respect to the interest assigned,
129
<PAGE>
sold, delegated or granted that are greater or more burdensome than those taxes,
duties or charges to which such Lender was subject on such date with respect to
the interest assigned, sold, delegated or granted, unless such bank or other
entity waives its right to such increased reimbursement. In the event of any
assignment or participation that is permissible pursuant to the preceding
sentence:
(i) in the case of an assignment, upon notice thereof by such
Lender to the Borrower, the assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same rights and
benefits as it would have if it were such Lender hereunder and the holder
of a Note and the assigning Lender shall be relieved of its obligations
hereunder to the extent of such assignment, and
(ii) in the case of a participation, the participant shall not
have any rights under this Agreement or any Note or any other Loan Document
(the participant's rights against such Lender in respect of such
participation to be those set forth in the agreement executed by such
Lender in favor of the participant relating thereto which agreement shall
not, in any event, grant to the participant the right of consent as to any
matter under the Loan Documents other than those which require the consent
of all Lenders).
(d) Subject to the terms of Section 13.20 hereof, each Lender may
furnish any information concerning the Credit Parties and their respective
Subsidiaries in the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants).
(e) In the event that any Lender shall assign or sell its Notes in
accordance with the provisions of this Section 13.14(a) or 13.15 hereof, such
Lender shall at the time of such assignment or sale give Written Notice to the
Agent of the name and address of the assignee (including the name of the account
officer if applicable), and shall make all endorsements to the grid schedule
attached thereto to make the information contained therein accurate. In the
event of such assignment or sale, each Credit Party hereby agrees that it shall
execute and deliver:
(i) at the request of the assigning or selling Lender, if part
of such Lender's pro rata share of any Loan and/or the Commitments as to
the Borrower is sold, assigned or transferred in accordance with the
provisions of this Section 13.15, one or more Notes to the order of such
Lender and such assignee or buyer to evidence the portions of the Advances
retained and sold; and
(ii) at the request of the Agent, any amendment to any Loan
Document to effectuate this Section 13.15.
(f) Each Lender agrees that such Lender shall not assign all or any
part of its Commitment unless the assignee thereof shall be a bank or trust
company organized under the laws of the United States of America or any State
thereof having a combined capital and surplus of not less than $100,000,000 or
other financial institution reasonably acceptable to the Borrower; provided,
however, that this sentence shall in no event apply to any interests granted by
any Lender through a participation.
130
<PAGE>
(S) 13.16. Counterparts; Facsimile Signature. (a) This Agreement
---------------------------------
may be executed by the parties hereto individually or in any combination, in one
or more counterparts, each of which shall be an original and all of which shall
together constitute one and the same agreement.
(b) Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
(S) 13.17. Letter of Credit Participation and Certain Payments. (a)
---------------------------------------------------
Each Lender agrees that upon any acceleration of the Lender Debt as provided in
Section 11 hereof, each such Lender, without any further action, shall be deemed
to have taken, as of the date of issuance of each outstanding Letter of Credit,
an undivided participating interest from each Issuing Lender in all Letters of
Credit outstanding at such time and the Letter of Credit Agreements relating
thereto in a percentage equal to such Lender's Revolving Credit Facility
percentage set forth in Schedule 2.2 hereto. Each Lender shall hold the
relevant Issuing Lender harmless and indemnify such Issuing Lender for such
Lender's pro rata share of any drawing under any Letter of Credit in which it
has taken such an undivided participating interest under this Section 13.17.
(b) The obligation of each Lender to make payments to an Issuing
Lender with respect to any Letter of Credit after having taken a participation
therein as provided above shall be irrevocable and shall not be subject to any
qualification or exception whatsoever and shall be made in accordance with the
terms and conditions of this Agreement under all circumstances, including
without limitation any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement,
any of the Loan Documents, and all other documents and instruments executed
by any of the Credit Parties or any Affiliate thereof and delivered to the
Agent, the Issuing Lender thereof or any other Lender in connection with or
related to the Loans, the Letters of Credit or the Collateral, together
with any and all amendments, extensions, renewals and modifications
thereof;
(ii) the existence of any claim, set-off, defense or other right
which any Credit Party may have at any time against the beneficiary named
in any Letter of Credit or any transferee of any Letter of Credit (or any
person for whom any such transferee may be acting), the Agent, the Issuing
Lender thereof, any other Lender or any other person, whether in connection
with this Agreement, such Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying transactions
between any Credit Party or any Subsidiary thereof and the beneficiary
named in such Letter of Credit);
(iii) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of this Agreement or
any of the Loan Documents; or
(v) the occurrence of any Default or Event of Default.
131
<PAGE>
(S) 13.18. Invalidity. Whenever possible, each provision of this
----------
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation, it
shall be deemed modified to conform to the minimum requirements of such law or
regulation, or, if for any reason it is not deemed so modified, it shall be
ineffective and invalid only to the extent of such prohibition or invalidity
without the remainder thereof or any of the remaining provisions of this
Agreement being prohibited or invalid.
(S) 13.19. Disclosure of Financial Information. Subject to the terms
-----------------------------------
of Section 13.20 hereof, the Agent and each Lender are each hereby authorized to
deliver a copy of any financial statement or any other information relating to
the business, operations or financial condition of the Borrower and each of its
Subsidiaries which may be furnished to it hereunder or otherwise, to any other
Lender, any court, Governmental Body having jurisdiction over the Agent or such
Lender, to any Person which shall, or shall have any right or obligation to,
succeed to all or any part of the Agent's or such Lender's interest in any of
the Advances, the Letters of Credit, this Agreement and any Collateral or to
any actual or prospective participant therein or assignee thereof.
(S) 13.20. Maintenance of Confidentiality. The Lenders and the Agent
------------------------------
shall hold all non-public, proprietary or confidential information obtained
pursuant to or in connection with the transactions contemplated by the Loan
Documents (the "CONFIDENTIAL INFORMATION") in confidence and shall not use or
disclose any such Confidential Information except for purposes of the
transactions contemplated by and in accordance with the Loan Documents;
provided, however, that the Lenders and the Agent may disclose any such
Confidential Information (i) to their respective examiners, outside auditors,
counsel, consultants, appraisers and other professional advisors in connection
with the transactions contemplated by the Loan Documents, (ii) as required by
any Governmental Body, or (iii) to any proposed syndicate member or any proposed
assignee or participant in connection with the contemplated transfer, in
accordance with Section 13.14 hereof, of any Note or participation therein,
provided, that any such person shall execute a confidentiality agreement
containing provisions substantially identical to this Section 13.20.
Notwithstanding the foregoing, the provisions of this Section 13.20 shall not
apply to such portions of the Confidential Information that (i) are or become
available to the public through no fault or action of the Agent or any of the
Lenders or their representatives, or (ii) become available to the Agent or any
Lender or their representatives on a non-confidential basis from a source, other
than the Borrower or its representatives, not thereby violating any agreement
with or other duty to the Borrower.
(S) 13.21. Effect of this Agreement. The term "Agreement", "hereof",
------------------------
"herein" and similar terms as used in the Original Credit Agreement, shall mean
and refer to, from and after the New Closing Date, the Original Loan Agreement
as amended and restated hereby. Except as herein specifically agreed, the
Original Credit Agreement (as herein amended and restated) and the Loan
Documents are hereby ratified and confirmed and shall remain in full force and
effect in accordance with their respective terms."
132
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AMENDED AND
RESTATED CREDIT AGREEMENT to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above written.
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By: [SIGNATURE ILLEGIBLE]
-------------------------
Name:
Title:
Address: Muzak Limited Partnership
400 North 34th Street, Suite 200
Seattle, Washington 98103
Attention: Mr. John Jester
Fax: (206) 633-6210
With copies to: Centre Partners
One Rockefeller Plaza, Suite 1025
New York, New York 10020
Attention: Mr. Mark Jennings
Fax: (212) 632-4846
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, As Agent and as a Lender
By: /s/ Charles J. Delaney
---------------------------
Charles J. Delaney
First Vice President
Union Bank of Switzerland
By: /s/ Michael Greene
---------------------------
Michael Greene
First Vice President
Union Bank of Switzerland
Address: 299 Park Avenue
New York, New York 10171
Attention: Mr. Michael Greene
Fax: (212) 821-6333
133
<PAGE>
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, as a Lender
By: /s/ James W.Latimer
---------------------------
James W. Latimer
Managing Director
Address: 200 Galleria Parkway, N.W., Suite 950
Atlanta, Georgia 30339
Fax: (404) 951-1005
<PAGE>
Exhibit 10.4
<PAGE>
AMENDED AND RESTATED TERM NOTE
------------------------------
$33,797,802.20 New York, New York
issued as of September 4, 1992
Amended and Restated
as of January 31, 1994
FOR VALUE RECEIVED, MUZAK LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Debtor"), hereby promises to pay to the order of UNION BANK OF
SWITZERLAND, NEW YORK BRANCH (the "Payee"), at the offices of Union Bank of
Switzerland, New York Branch located at 299 Park Avenue, New York, New York
10171-0026, or at such other place as the Payee or any holder hereof may from
time to time designate, on January 31, 2001 (or earlier as hereinafter referred
to), the principal sum of THIRTY THREE MILLION SEVEN HUNDRED NINETY SEVEN
THOUSAND EIGHT HUNDRED TWO and 20/100 DOLLARS ($33,797,802.20), or such lesser
amount as shall then constitute the Payee's pro rata share of the Term Loan, in
--- ----
lawful money of the United States, at such times and in such amounts as provided
in the Credit Agreement (as hereinafter defined), and to pay interest in like
money at such office or place and at such rates and times on the unpaid
principal balance hereof as provided in the Amended and Restated Credit
Agreement, dated as of September 4, 1992, as amended and restated as of January
31, 1994 (as so amended and restated and as further amended, modified or
supplemented from time to time in accordance with its terms, the "Credit
Agreement"), among the Debtor, the Lenders parties thereto (collectively, the
"Lenders") and Union Bank of Switzerland, New York Branch, as agent (in such
capacity, the "Agent") for the Lenders.
This Amended and Restated Term Note is issued pursuant to the Credit
Agreement, and replaces the Term Note issued by the Debtor as of September 4,
1992 pursuant to the Credit Agreement. This Amended and Restated Term Note is
entitled to the benefits of the Credit Agreement, including all Collateral
provided for therein or in connection therewith. Capitalized terms used but not
defined herein shall have the meanings set forth in the Credit Agreement.
Reference is made to the Credit Agreement for rights as to mandatory and
optional prepayments and payments and for rights as to the acceleration of the
unpaid principal balance hereof before its stated maturity upon the happening of
certain events. The Debtor shall make when due any and all payments and
prepayments on the Term Loan required under the Credit Agreement.
No Partner nor any partner, legal representative, heir, estate,
successor or assign of any such Partner or any officer, director, shareholder or
partner in any such Partner or Partners, whether disclosed or undisclosed, in
each case solely in their respective capacities as such, shall have any personal
liability under this Amended and Restated Term Note or under any of the other
the Loan Documents for (i) the payment of any sum of money which is or may be
payable under this Amended and Restated Term Note or under any of the other Loan
Documents, including, but not limited to, the repayment of the Loans or (ii) the
performance or discharge of any covenant
<PAGE>
or undertakings of the Debtor under the Loan Documents; provided, however, that
-------- -------
the foregoing shall not in any way affect the validity or enforceability of this
Amended and Restated Term Note or any of the other Loan Documents against the
Credit Parties being party thereto or, in particular, the Pledge Agreements in
accordance with their respective terms against the respective parties thereto
(including, without limitation, the pledge of equity interests thereunder) or
otherwise exonerate any Partner in respect of its receipt of distributions made
in contravention of the Credit Agreement, the Partnership Agreement or any other
agreement governing any Credit Party.
The Debtor waives diligence, demand, presentment, protest and notice
of any kind, and assents to extensions of the time of payment, release,
surrender or substitution of security, or forbearance or other indulgence,
without notice.
In the event the Payee, the Agent or any holder hereof shall refer
this Amended and Restated Term Note to an attorney for collection, the Debtor
agrees to pay, in addition to unpaid principal and interest, all the costs and
expenses incurred in attempting or effecting collection hereunder, including
reasonable attorneys' fees, whether or not suit is instituted.
The amount of the Term Loan which the Payee has made to the Debtor and
the amount of each payment or prepayment made on account of principal thereof
shall be recorded by the Payee and endorsed on the grid schedule attached
hereto, which is made a part of this Amended and Restated Term Note (or so noted
in its records); provided, however, that the failure of the Payee to make any
-------- -------
such endorsement or recordation shall not in any manner affect the obligation of
the Debtor to repay the Payee's pro rata share of the Term Loan in accordance
--- ----
with the terms hereof. Any such endorsement or recordation shall represent
conclusive evidence of the date and amount of the Debtor's pro rata share of the
--- ----
Term Loan or any payment or prepayment of principal thereon, absent manifest
error.
This Amended and Restated Term Note may not be changed, modified or
terminated orally, but only by an agreement in writing signed by the Debtor or
any successor or assign of the Debtor and the Payee or any holder hereof.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS AMENDED AND
RESTATED TERM NOTE, THE DEBTOR WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT
TO A TRIAL BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS
AND CROSS-CLAIMS (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY
REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED,
PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM NON CONVENIENS
AND IMPROPER VENUE. The Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the courts of the State of New York and of any Federal court
located in the City of New York in connection with any action or proceeding
arising out of or relating to this Amended and Restated Term Note. This Amended
and Restated Term Note shall be governed by and construed in accordance with the
internal laws of the State of New York, and shall be binding upon the successors
and assigns of
2
<PAGE>
the Debtor and inure to the benefit of the Payee, its successors, endorsees and
assigns. If any term or provision of this Amended and Restated Term Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions herein shall in no way be affected thereby.
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By: [SIGNATURE ILLEGIBLE]
----------------------------
Name:
Title:
3
<PAGE>
AMENDED AND RESTATED TERM NOTE
------------------------------
$12,802,197.80 New York, New York
issued as of September 4, 1992
Amended and Restated
as of January 31, 1994
FOR VALUE RECEIVED, MUZAK LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Debtor"), hereby promises to pay to the order of
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION (the "Payee"), at the
offices of Union Bank of Switzerland, New York Branch located at 299 Park
Avenue, New York, New York 10171-0026, or at such other place as the Payee or
any holder hereof may from time to time designate, on January 31, 2001 (or
earlier as hereinafter referred to), the principal sum of TWELVE MILLION EIGHT
HUNDRED TWO THOUSAND ONE HUNDRED NINETY SEVEN and 80/100 DOLLARS
($12,802,197.80), or such lesser amount as shall then constitute the Payee's pro
---
rata share of the Term Loan, in lawful money of the United States, at such times
- ----
and in such amounts as provided in the Credit Agreement (as hereinafter
defined), and to pay interest in like money at such office or place and at such
rates and times on the unpaid principal balance hereof as provided in the
Amended and Restated Credit Agreement, dated as of September 4, 1992, as amended
and restated as of January 31, 1994 (as so amended and restated and as further
amended, modified or supplemented from time to time in accordance with its
terms, the "Credit Agreement"), among the Debtor, the Lenders parties thereto
(collectively, the "Lenders") and Union Bank of Switzerland, New York Branch, as
agent (in such capacity, the "Agent") for the Lenders.
This Amended and Restated Term Note is issued pursuant to the Credit
Agreement, and replaces the Term Note issued by the Debtor as of September 4,
1992 pursuant to the Credit Agreement. This Amended and Restated Term Note is
entitled to the benefits of the Credit Agreement, including all Collateral
provided for therein or in connection therewith. Capitalized terms used but not
defined herein shall have the meanings set forth in the Credit Agreement.
Reference is made to the Credit Agreement for rights as to mandatory and
optional prepayments and payments and for rights as to the acceleration of the
unpaid principal balance hereof before its stated maturity upon the happening of
certain events. The Debtor shall make when due any and all payments and
prepayments on the Term Loan required under the Credit Agreement.
No Partner nor any partner, legal representative, heir, estate,
successor or assign of any such Partner or any officer, director, shareholder or
partner in any such Partner or Partners, whether disclosed or undisclosed, in
each case solely in their respective capacities as such, shall have any personal
liability under this Amended and Restated Term Note or under any of the other
the Loan Documents for (i) the payment of any sum of money which is or may be
payable under this Amended and Restated Term Note or under any of the other Loan
Documents, including, but not limited to, the repayment of the Loans or (ii) the
performance or discharge of any covenant
<PAGE>
or undertakings of the Debtor under the Loan Documents; provided, however, that
-------- -------
the foregoing shall not in any way affect the validity or enforceability of this
Amended and Restated Term Note or any of the other Loan Documents against the
Credit Parties being party thereto or, in particular, the Pledge Agreements in
accordance with their respective terms against the respective parties thereto
(including, without limitation, the pledge of equity interests thereunder) or
otherwise exonerate any Partner in respect of its receipt of distributions made
in contravention of the Credit Agreement, the Partnership Agreement or any other
agreement governing any Credit Party.
The Debtor waives diligence, demand, presentment, protest and notice
of any kind, and assents to extensions of the time of payment, release,
surrender or substitution of security, or forbearance or other indulgence,
without notice.
In the event the Payee, the Agent or any holder hereof shall refer
this Amended and Restated Term Note to an attorney for collection, the Debtor
agrees to pay, in addition to unpaid principal and interest, all the costs and
expenses incurred in attempting or effecting collection hereunder, including
reasonable attorneys' fees, whether or not suit is instituted.
The amount of the Term Loan which the Payee has made to the Debtor and
the amount of each payment or prepayment made on account of principal thereof
shall be recorded by the Payee and endorsed on the grid schedule attached
hereto, which is made a part of this Amended and Restated Term Note (or so noted
in its records); provided, however, that the failure of the Payee to make any
-------- -------
such endorsement or recordation shall not in any manner affect the obligation of
the Debtor to repay the Payee's pro rata share of the Term Loan in accordance
--- ----
with the terms hereof. Any such endorsement or recordation shall represent
conclusive evidence of the date and amount of the Debtor's pro rata share of the
--- ----
Term Loan or any payment or prepayment of principal thereon, absent manifest
error.
This Amended and Restated Term Note may not be changed, modified or
terminated orally, but only by an agreement in writing signed by the Debtor or
any successor or assign of the Debtor and the Payee or any holder hereof.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS AMENDED AND
RESTATED TERM NOTE, THE DEBTOR WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT
TO A TRIAL BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS
AND CROSS-CLAIMS (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY
REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED,
PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM NON CONVENIENS
AND IMPROPER VENUE. The Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the courts of the State of New York and of any Federal court
located in the City of New York in connection with any action or proceeding
arising out of or relating to this Amended and Restated Term Note. This Amended
and Restated Term Note shall be governed by and construed in accordance with the
internal laws of the State of New York, and shall be binding upon the successors
and assigns of
2
<PAGE>
the Debtor and inure to the benefit of the Payee, its successors, endorsees and
assigns. If any term or provision of this Amended and Restated Term Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions herein shall in no way be affected thereby.
MUZAK LIMITED PARTNERSHIP
By: MLP Acquisition, L.P.,
its managing general partner
By: Music Holdings Corp.,
its general partner
By: [SIGNATURE ILLEGIBLE]
--------------------------
Name:
Title:
3
<PAGE>
Exhibit 10.5
<PAGE>
FIRST AMENDMENT
---------------
THIS FIRST AMENDMENT made as of the 31st day of January, 1994 to the
Subordinated Loan Agreement between MUZAK LIMITED PARTNERSHIP (formerly known as
MLP Operating, L.P., the "Borrower"), and BARCLAYS BANK PLC ("Barclays") dated
-------- --------
as of September 4, 1992 (as heretofore, hereby or hereafter amended,
supplemented or otherwise modified, the "Loan Agreement"; terms used herein and
--------------
defined in the Loan Agreement are used herein as so defined).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Barclays entered into (i) a financing arrangement with the
Borrower pursuant to the Loan Agreement and (ii) in connection with the Loan
Agreement, various promissory notes and other agreements, documents and
instruments, evidencing, creating or granted in connection with indebtedness
executed by the Borrower and related parties (together with the Loan Agreement,
the "Loan Documents");
--------------
WHEREAS, the Borrower (i) entered into the Asset Purchase and Contribution
Agreement, dated as of November 24, 1993, among Comcast Corporation, Comcast
Sound Communications, Inc., a Delaware corporation ("CSCI"), Comcast Sound
----
Communications, Inc., a California corporation, Comcast Sound Communications,
Inc., a Colorado corporation, Comcast Sound Communications, Inc., a Connecticut
corporation, Comcast Sound Communications, Inc., a Florida corporation, Comcast
Sound Communications, Inc., a Texas corporation, Comcast Sound Communications,
Inc., a Michigan corporation, Comcast Sound Communications, Inc., a New York
corporation, Comcast Sound Communications, Inc., a Pennsylvania corporation,
Comcast Sound Communications, Inc., an Illinois corporation, Comcast Sound
Communications, Inc., an Indiana corporation, Comcast Sound Management, Inc.,
Comcast Sound Communications and Comcast Real Estate Holdings, Inc. and the
Borrower (the "Comcast Purchase Agreement") and (ii) desires to enter into the
--------------------------
Amended and Restated Credit Agreement dated as of the date hereof among the
Borrower, the lenders from time to time parties thereto and Union Bank of
Switzerland, as agent (the "Senior Credit Agreement"); and
-----------------------
WHEREAS, the Borrower has requested that Barclays amend certain provisions
in the Loan Agreement and Barclays is willing to agree to amend such provisions
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the agreements herein
contained, the parties hereby agree as follows:
<PAGE>
2
1. Amendment to Provisions Referring to "Seller". Each provision of the
---------------------------------------------
Loan Agreement referring to the defined term "Seller" is hereby amended by
deleting each such reference to "Seller" and substituting in lieu thereof the
defined term "Company".
2. Amendment of Section 1. (a) Section 1 of the Loan Agreement is hereby
----------------------
amended by deleting the definitions of "Acquisition", "Affiliate", "Capital
Expenditures", "Class A-2 Partnership Interests", "Class C Partnership
Interests", "Disclosure Schedules", "Earn-Out Note Subordination Agreement",
"ERISA Affiliate", "Exchange Note Subordination Agreement", "Partnership
Agreement", "Purchase Agreement", "Senior Credit Agreement", "Senior
Indebtedness", "Senior Loan Documents", "Specified Transactions", "Subordinated
Indebtedness" and "Subordination Agreements" contained therein in their entirety
and substituting in lieu thereof, in alphabetical order, the following:
"'Acquisition' shall mean the acquisition by the Borrower on the
-----------
Closing Date of substantially all of the assets of the Company and the
equity securities in certain of the Company's subsidiaries, and the
assumption by the Borrower on the Closing Date of certain of the
liabilities of the Company, all as set forth in the Purchase Agreement."
"'Affiliate' of any specified Person shall mean any other Person
---------
directly or indirectly controlling or controlled by or under common control
with such specified Person or which is a director, officer or partner
(limited or general) of such specified Person, provided that, for purposes
--------
of this definition, the Bank, the Senior Lenders, the Seller, the
Transferors and their respective Affiliates shall not be an "Affiliate" of
the Borrower. For the purposes of this definition, "control", when used
with respect to any specified Person, means the possession, direct or
indirect, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. For the purpose of
this definition (and without limiting such definition in any manner), each
of the Partners (other than the Bank, the Senior Lenders, The Field
Corporation, the Transferors and their respective Affiliates), and the
officers and directors of the Borrower shall be deemed to control the
Borrower and its Subsidiaries and shall be an Affiliate of the Borrower and
its Subsidiaries."
"'Capital Expenditures' shall mean, for any fiscal period as
--------------------
determined in accordance with GAAP, all expenditures (whether made in the
form of cash or other property, including, without limitation, expenditures
made by exchanging or trading in property) for, or contracts for
<PAGE>
3
expenditures with respect to, any fixed assets or improvements, or for
replacements, substitutions or additions thereto, that have a useful life
of more than one year, including, but not limited to payments on account of
(i) the direct or indirect acquisition of such assets by way of increased
product or service charges, offset items or otherwise, (ii) any Liens
described in clause (g) of the definition of 'Permitted Encumbrances' and
(iii) Capital Leases, provided, however, that solely for the purpose of
-------- -------
calculating the covenant set forth in subsection 7.1, Capital Expenditures
shall exclude capitalized labor expenditures."
"'Class A-2 Partnership Interests' shall mean the class A-2 limited
-------------------------------
partnership interests of the Borrower issued pursuant to the Partnership
Agreement and held on the New Closing Date by UBS (or an Affiliate),
Internationale Nederlanden (U.S.) Finance Corporation (or an Affiliate),
and Mr. John A. Hawkins and which may be acquired (i) pursuant to the
Option Agreement by the Bank or any Affiliate of the Bank, (ii) by a Senior
Lender under the Senior Credit Agreement, (iii) pursuant to the Partnership
Agreement or (iv) pursuant to the Guaranteed Note and the Put and Call by
UBS or MLP."
"'Class C Partnership Interests' shall mean the Class C limited
-----------------------------
partnership interests of the Borrower issued pursuant to the Partnership
Agreement and held on the New Closing Date by the Company."
"'Class C Subordination Agreement' shall mean that certain Exchange
-------------------------------
Note Subordination Agreement, dated the Closing Date, by and among the
Borrower, the Company, the Bank and the agent for the Senior Lenders, in
substantially the form attached hereto as Exhibit E-2."
"'Disclosure Schedules' shall mean all schedules delivered by the
--------------------
Company pursuant to the Purchase Agreement."
"'Earn-Out Subordination Agreement' shall mean that certain Earn-Out
--------------------------------
Subordination Agreement, dated the Closing Date, by and among the Borrower,
the Company, the Bank and UBS, as agent for the Senior Lenders, in
substantially the form attached hereto as Exhibit E-1, as it may be
amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof."
"'ERISA Affiliate' shall mean any Person that for purposes of Title I
---------------
and Title IV of ERISA and Section 412 of the Code is (i) a member of the
controlled group of, or under common control with (within the meaning of
Section 414 of the Code and the regulations promulgated and the rulings
issued thereunder) any Credit Party (or, to the extent that
<PAGE>
4
the Bank has recourse to it under a Guaranty, any Guarantor), or (ii)
solely for purposes of subsections 6.12, 7.9, 9(i) and 4.13 (except as
otherwise specified in such subsections), a member of the controlled group
of, or under common control with (within the meaning of Section 414 of the
Code and the regulations promulgated and the rulings issued thereunder)
CCI, MLP or any Credit Party (or, to the extent that the Bank has recourse
to it under a Guaranty, any Guarantor); provided, that delivery by.the
--------
Borrower of any (x) notice pursuant to subsection 6.12 or (y)
representation or schedule pursuant to subsection 4.13 shall not, in and of
itself, be construed as an admission that either MLP or CCI is in a
controlled group or under common control with any Credit Party (or such
Guarantor) within the meaning of Section 414 of the Code and the
regulations promulgated and the rulings issued thereunder."
"'Partnership Agreement' shall mean the Second Amended and Restated
---------------------
Agreement of Limited Partnership of Muzak Limited Partnership, a Delaware
limited partnership, dated as of January 31, 1994, as amended, supplemented
or otherwise modified from time to time."
"'Senior Credit Agreement' shall mean (1) the Amended and Restated
-----------------------
Credit Agreement, dated as of September 4, 1992, as amended and restated as
of January 31, 1994, among the Borrower, the Lenders listed therein and
UBS, as agent for such lenders and the other financial institutions now or
hereafter parties thereto, as originally in effect (the 'Original Credit
---------------
Agreement'), (2) the Guaranteed Note, (3) all modifications, amendments,
---------
supplements or replacements of the Original Credit Agreement or the
Guaranteed Note ('Amendments'), (4) any agreement evidencing Indebtedness
----------
of the Borrower all or a portion of the proceeds of which are used to
refinance any Indebtedness incurred pursuant to such Credit Agreement or
the Guaranteed Note or any previous refinancing thereof, in each case, as
modified, amended, supplemented or replaced from time to time
('Refinancings', and together with the Original Credit Agreement, the
--------------
Guaranteed Note and the Amendments, the 'Amended Credit Agreement'), and
------------------------
(5) any agreement (as amended, modified or supplemented from time to time,
a 'New Credit Agreement') which, following the termination and satisfaction
--------------------
in full of all agreements referred to in clauses (1), (2), (3) and (4)
above, creates Indebtedness which states that it is 'Senior Indebtedness'
by reference to this Agreement (the agreements referred to in clauses (1),
(2), (3), (4) and (5) above, being the 'Combined Senior Credit
----------------------
Agreements'), except to the extent that:
----------
(i) the aggregate amount of Indebtedness incurred and permitted to be
incurred under the Amended Credit Agreement exceeds at any time the
sum of (A) the sum of (i) the original outstanding amount of the term
loans
<PAGE>
5
under the Original Credit Agreement and the Guaranteed Note on the New
Closing Date plus (ii) the maximum amount of the revolving credit loan
commitments under the Original Credit Agreement on the New Closing
Date less (iii) following the date that is 90 days after the
Guaranteed Loan Maturity Date, unless any event described in
subsection 8.2(a), (b) or (c) shall have occurred prior to such date
and be continuing (in which case this clause (iii) shall not apply),
the principal amount of the Guaranteed Loan whether or not actually
paid by the Borrower on or prior to such date under the Amended Credit
Agreement less (iv) all scheduled payments of principal of the term
loans (other than the Guaranteed Loan) actually made by the Borrower
through such time under the Amended Credit Agreements but in each case
described in this clause (iv) only to the extent that any such payment
(or portion thereof) would have become due and payable through such
time under Section 3.1(a) of the Original Credit Agreement plus (B)
the amount by which (i) $7,000,000 exceeds (ii) the amount of all (x)
increases in term loan borrowings, over the amount thereof which was
scheduled to be outstanding at such time under Section 3.1(a) of the
Original Credit Agreement, and (y) revolving commitments over the
amount of the revolving loan commitment under the Original Credit
Agreement as in effect on the New Closing Date, in each case, made
pursuant to any Amendments or Refinancings through such time,
(ii) the aggregate amount of revolving credit loans incurred and
permitted to be incurred at any time pursuant to the Amended Credit
Agreement exceeds $13,000,000, or
(iii) the aggregate amount of term loans incurred and permitted to be
incurred at any time under the Amended Credit Agreement exceeds the
sum of (A) the original outstanding amount of the term loans under the
Original Credit Agreement and the Guaranteed Note on the New Closing
Date less (i) following the date that is 90 days after the Guaranteed
Loan Maturity Date, unless any event described in subsection 8.2(a),
(b) or (c) shall have occurred prior to such date and be continuing
(in which case this clause (i) shall not apply), the principal amount
of the Guaranteed Loan whether or not actually paid by the Borrower on
or prior to such date under the Amended Credit Agreement less (ii) all
scheduled payments of principal of the term loans (other than the
Guaranteed Loan) actually made by the Borrower through such time under
the Amended Credit Agreement but in each case described in this clause
(ii) only to the extent that any such payment (or portion thereof)
would have become due and
<PAGE>
6
payable through such time under Section 3.1(a) of the Original Credit
Agreement plus (B) the amount by which (i) $5,000,000 exceeds (ii) all
increases in term loan borrowings, over the amount thereof which was
scheduled to be outstanding at such time under Section 3.1(a) of the
Original Credit Agreement, made pursuant to any Amendments and
Refinancings through such time,
provided, however, that, notwithstanding the foregoing, at any time,
-------- -------
including, without limitation, following the scheduled maturity date under
the Original Credit Agreement, the Combined Senior Credit Agreements shall
constitute the 'Senior Credit Agreement' so long as (A) the aggregate
amount of Indebtedness outstanding thereunder at such time does not exceed
$35,000,000, (B) the amount of Indebtedness constituting term loans
outstanding thereunder at such time does not exceed $25,000,000 and (C) the
amount of revolving credit loans outstanding and permitted to be
outstanding thereunder at such time does not exceed $13,000,000; provided,
--------
further, that the Combined Senior Credit Agreements shall in any event
-------
constitute the "Senior Credit Agreement" to the extent that the
Indebtedness and commitments outstanding thereunder do not exceed any of
the limitations set forth above in this definition and the amount of any
excess shall not constitute Senior Indebtedness."
"'Senior Indebtedness' shall mean (i) the principal of (X) all
-------------------
Indebtedness, now existing or hereafter created, of the Borrower under or
evidenced by the Senior Credit Agreement, the Guaranteed Note or the Notes
(as defined in the Senior Credit Agreement) from time to time issued in
connection therewith in aggregate amounts of term loans and revolving
credit loans incurred or to be incurred not exceeding the amounts set forth
in the definition of 'Senior Credit Agreement' (including, without
limitation, the contingent obligation of the Borrower in respect of any
letters of credit issued pursuant thereto) and (y) Indebtedness for
Borrowed Money of the Borrower (other than that issued pursuant to the
Senior Loan Documents and other than the Exchange Notes, the Earn-Out Note,
the Class C-1 Exchange Notes, the Converted Loan (if incurred), the Special
Subordinated Debt (if incurred) and Indebtedness permitted pursuant to
Section 10.3(b) or (i) of the Senior Credit Agreement as originally in
effect) and Indebtedness of the Borrower in respect of Hedge Agreements, in
each case to the extent permitted by the terms of the Senior Credit
Agreement as originally in effect; (ii) all interest with respect to
principal described in the foregoing clause (i) and obligations described
in clause (iii) of this definition (including, without limitation, any
interest accruing subsequent to the commencement of any proceeding against
or with respect to the Borrower under the Bankruptcy Code or any other
proceedings in insolvency, bankruptcy,
<PAGE>
7
receivership, reorganization, dissolution, assignment for the benefit of
creditors or other similar case or proceeding whether or not such interest
constitutes an allowed claim in any such proceeding); and (iii) all other
obligations, including all Lender Debt (as defined in the Senior Credit
Agreement), now existing or hereafter arising under the Senior Credit
Agreement, including, without limitation, premiums, commitment, agency and
other fees, expenses (including reasonable attorney's fees and
disbursements payable thereunder or in connection therewith) and
indemnities payable thereunder."
"'Senior Loan Documents' shall be the collective reference to the
---------------------
Senior Credit Agreement, each Security Document, each Guaranty, the Notes,
each Letter of Credit, each Letter of Credit Agreement, each Borrower's
Certificate, each Borrowing Base Certificate, each landlord's Certificate
and each Hedge Agreement (each, as defined in the Senior Credit Agreement),
the Guaranteed Note and any amendments, replacements, supplements and
modifications thereto from time to time permitted pursuant to the
definitions of 'Senior Credit Agreement'."
"'Specified Transactions' shall mean and include: (1) non-cash
----------------------
payments of distributions on the Class C Partnership Interests; (2) the
conversion of the Class C Partnership Interests into Class C Exchange Notes
pursuant to Section 16.02 of the Partnership Agreement and the accrual of
non-cash interest thereon; (3) non-cash payments of distributions on the
Class C-1 Partnership Interests and mandatory cash payments of
distributions on the Class C-1 Exchange Notes as provided in Section
17.02(a) of the Partnership Agreement; (4) the conversion of the Class C-1
Partnership Interests into Class C-1 Exchange Notes pursuant to Section
17.02 of the Partnership Agreement) and the accrual of non-cash interest
thereon; (5) the issuance of the Class C-1 Participation Option as provided
(and as defined in Section 17.02 of the Partnership Agreement) and the
issuance of the Class C-1 Partnership Interests upon the exercise thereof;
(6) the reclassification (including an adjustment of the number) of Class
C-1 Partnership Interests upon the occurrence of a Class C-1 Participation
Event (as such term is defined in the Partnership Agreement), (7) the
issuance of Earn-out Notes pursuant to Section 2.5 of the Purchase
Agreement and the accrual of non-cash interest thereon; (8) the issuance
and exercise of Class B Partnership Interest Options, and the issuance of
Class B Partnership Interests upon the exercise thereof, to Muzak
Management pursuant to the Management Option Plan; (9) the issuance of the
Management Notes; (10) the issuance of Class A-2 Partnership Interests to
the Bank (or any Affiliate) pursuant to the Option Agreements; (11) the
purchase by the Borrower of Class B Partnership Interests from former
members of Muzak Management (or their permitted transferees)
<PAGE>
8
and the settlement of options held by Muzak Management, in each case for
cash (only if no Default or Event of Default is continuing or would occur
as a result of making such cash payment and subject in all cases to the
prior or simultaneous payment of all amounts due from the applicable
employee under his or her respective Management Notes, which Management
Notes shall be satisfied in full prior to any payment of any cash in
respect of the settlement of options or purchase of Class B Partnership
Interests from such employee) (provided that, to the extent any member of
--------
Muzak Management, within 20 days of the settlement in cash of his or her
options, utilizes such cash to purchase Class B Partnership Interests in
the Borrower, such cash amount need not be applied to such person's
Management Notes) or in "Permitted Securities" (as defined in the
Partnership Agreement); and (12) so long as no Default or Event of Default
is continuing, a loan or loans by the Borrower to the Administrative
General Partner of funds pursuant to Section 11.14(d) of the Partnership
Agreement (as in effect on the New Closing Date)."
"'Subordinated Indebtedness' shall mean the indebtedness of the
-------------------------
Borrower represented, from time to time, by the Earn-Out Note, the Class C
Exchange Notes and the Class C-1 Exchange Notes."
"'Subordination Agreements' shall mean, collectively, the Earn-Out
------------------------
Subordination Agreement, the Class C Exchange Note Subordination Agreement
and the Class C-1 Exchange Note Subordination Agreement."
(b) Subsection 1 of the Loan Agreement is hereby amended by deleting
clause (h) of the definition of "Permitted Encumbrances" contained therein in
its entirety and substituting in lieu thereof the following:
"(h) Liens existing on the date hereof to the extent set forth on
Schedule 1.1(A) and Liens existing on the New Closing Date to the extent
set forth on Schedule 1 to the First Amendment hereto dated as of January
31, 1994 and, in each case, any renewals thereof, but not any increase in
amount thereof and not any extension thereof to other property;"
(c) Section 1 of the Loan Agreement is hereby amended by adding, in
alphabetical order, the following defined terms:
"'Class C Exchange Notes' shall have the meaning set forth in the
----------------------
Senior Credit Agreement as in effect on the New Closing Date."
"'Class C Subordination Agreement' shall have the meaning set forth in
-------------------------------
the Senior Credit Agreement as in effect on the New Closing Date."
<PAGE>
9
"'Class C-1 Exchange Notes' shall have the meaning set forth in the
------------------------
Senior Credit Agreement as in effect on the New Closing Date."
"'C-1 Holders' shall have the meaning set forth in the Senior Credit
-----------
Agreement as in effect on the New Closing Date."
"'Class C-1 Partnership Interests' shall have the meaning set forth in
-------------------------------
the Senior Credit Agreement as in effect on the New Closing Date."
"'Class C-1 Subordination Agreement' shall have the meaning set forth
---------------------------------
in the Senior Credit Agreement as in effect on the New Closing Date."
"'Comcast Acquisition' shall have the meaning set forth in the Senior
-------------------
Credit Agreement as in effect on the New Closing Date."
"'Comcast Assets' shall have the meaning set forth in the Senior
--------------
Credit Agreement as in effect on the New Closing Date."
"'Comcast Purchase Agreement' shall have the meaning set forth in the
--------------------------
preamble to this Agreement."
"'Comcast Purchase Documents' shall have the meaning set forth in the
--------------------------
Senior Credit Agreement as in effect on the New Closing Date."
"'Company' shall mean, MLP Sales Limited Partnership, a Delaware
-------
limited partnership, and known prior to the Closing Date as Muzak Limited
Partnership."
"'Converted Loan' shall have the meaning set forth in the Senior
--------------
Credit Agreement as in effect on the New Closing Date."
"'Converted Equity' shall have the meaning set forth in the Senior
----------------
Credit Agreement as in effect on the New Closing Date."
"'CSCI' shall have the meaning set forth in the preamble to this
----
Agreement."
"'Guaranteed Loan' shall have the meaning set forth in the Senior
---------------
Credit Agreement as in effect on the New Closing Date."
"'Guaranteed Loan Documents' shall have the meaning set forth in the
-------------------------
Senior Credit Agreement as in effect on the New Closing Date."
<PAGE>
10
"'Guaranteed Loan Guarantees shall have the meaning set forth in the
--------------------------
Senior Credit Agreement as in effect on the New Closing Date."
"'Guaranteed Loan Maturity Date' shall mean October 31, 1994."
-----------------------------
"'Guaranteed Note' shall have the meaning set forth in the Senior
---------------
Credit Agreement as in effect on the New Closing Date."
"'Guaranty Accrued Obligations' shall have the meaning set forth in
----------------------------
the Senior Credit Agreement as in effect on the New Closing Date."
"'Initial Equity Issuance' shall have the meaning set forth in the
-----------------------
Senior Credit Agreement as in effect on the New Closing Date."
"'Issuance' shall have the meaning set forth in the Senior Credit
--------
Agreement. as in effect on the New Closing Date."
"'MLP' shall mean MLP Holdings L.P., a Delaware limited partnership."
---
"'MLP Guaranty' shall have the meaning set forth in the Senior Credit
------------
Agreement as in effect on the New Closing Date."
'"Net Proceeds' shall have the meaning set forth in the Senior Credit
------------
Agreement as in effect on the New Closing Date."
"'New Closing Date' shall mean the date and time on which the Term
----------------
Loan is made to the Borrower under the Senior Credit Agreement (and which
date, in any event, shall be no later than January 31, 1994)."
"'New Required Consents' shall have the meaning set forth in the
---------------------
Senior Credit Agreement as in effect on the New Closing Date."
"'Put and Call' shall have the meaning set forth in the Senior Credit
------------
Agreement as in effect on the New Closing Date."
"'Special Class A-2 Partnership Units' shall have the meaning set
-----------------------------------
forth in the Senior Credit Agreement as in effect on the New Closing Date."
"'Special Subordinated Debt' shall have the meaning set forth in the
-------------------------
Senior Credit Agreement as in effect on the New Closing Date."
<PAGE>
11
"'Special Subordinated Takeout Financing' shall mean an issuance by
--------------------------------------
the Borrower, at any time prior to the Guaranteed Loan Maturity Date, to an
Affiliate of the Borrower or to any third party investor, of (A) up to
$5,000,000 principal amount of subordinated debt (which indebtedness shall
not (i) accrue cash interest in excess of 12.5% per annum, (ii) provide for
the payment of any portion of the principal thereunder prior to 8 years
from the date of issuance, or (iii) rank higher than pari passu in priority
with the Loan) (the 'Special Subordinated Debt'), or (B) any equity
-------------------------
interest of the Borrower (whether by direct issuance or by virtue of
rights, warrants, options, puts, calls, or other like arrangements) (other
than an Initial Equity Issuance) and that does not require cash payments
with respect thereto during the term of this Agreement, whether by
dividend, interest or otherwise, of which the full cash purchase price of
such Special Subordinated Takeout Financing shall be applied in the manner
set forth in Section 3.1(g) of the Senior Credit Agreement (and subject to
specified circumstances and pursuant to the terms and conditions set forth
in the Guaranteed Note and the Put and Call), all on terms and conditions,
and pursuant to documentation, reasonably satisfactory to the Bank."
"'Successor Corporation' shall have the meaning set forth in
---------------------
subsection 6.6."
"'Takeout Financing' shall mean a public offering or private placement
-----------------
by the Borrower (or the Successor Corporation) on or prior to the
Guaranteed Loan Maturity Date of certain securities on terms and
conditions, and pursuant to documentation, reasonably satisfactory to the
Borrower and the Bank, the Net Proceeds of which shall be at least equal
(and shall be applied) to all amounts outstanding (including accrued and
unpaid interest, fees and expenses) under the Term Loan, the Loan and the
Guaranteed Loan."
"'Term Loan' shall have the meaning set forth in the Senior Credit
---------
Agreement as in effect on the New Closing Date."
"'Transferors' shall have the meaning set forth in the Senior Credit
-----------
Agreement as in effect on the New Closing Date."
3. Amendment of Subsection 3.2. Subsection 3.2 of the Loan Agreement
---------------------------
is hereby amended by (a) deleting the heading, "Optional Prepayments", and
--------------------
substituting in lieu thereof the following: "Optional and Mandatory
----------------------
Prepayments", (b) adding following the heading the letter "(A)", (c) deleting
- -----------
the word "and" at the end of clause (a) of the second sentence thereof and
substituting in lieu thereof a comma, (d) adding at the end of
<PAGE>
12
the second sentence thereof the following: "and (c) mandatory prepayments
described in subsection 3.2(B)" and (e) adding at the end of such subsection the
following:
"(B) (i) Until such time as the Loan shall not be outstanding, the
Borrower shall pay and there shall become due and payable, concurrently
with the receipt of Net Proceeds with respect to a Takeout Financing, a
prepayment (without premium or penalty) in respect of the Loan and other
Indebtedness equal to the Net Proceeds of such Issuance, such prepayment to
be applied as follows: first, to the Term Loan until the Term Loan (and any
other amounts outstanding thereunder, including accrued and unpaid
interest, fees and expenses) has been paid in full; second, to the
Guaranteed Loan until the Guaranteed Loan (and any other amounts
outstanding thereunder, including accrued and unpaid interest, fees and
expenses) has been paid in full; and third, to the payment of the Loan
until the Loan (and any other amounts outstanding thereunder, including
accrued and unpaid interest, fees and expenses) has been paid in full.
(ii) Until such time as the Loan shall not be outstanding, the
Borrower shall pay and there shall become due and payable, concurrently
with the receipt of Net Proceeds with respect to an Initial Equity
Issuance, a prepayment (without premium or penalty) in respect of the Loan
and other Indebtedness equal to the Net Proceeds of such Initial Equity
Issuance, such prepayment to be applied as follows: first, to the
Guaranteed Loan until all 'Guaranteed Loan Obligations' (as such term is
defined in the Guaranteed Note) have been paid in full, second, to the
payment of the Loan until the Loan (and any other amounts outstanding
thereunder, including accrued and unpaid interest, fees and expenses) is
paid in full, and third, to other Indebtedness of the Borrower."
4. Amendment of Subsection 6.6. Subsection 6.6 of the Loan Agreement
---------------------------
is hereby amended by adding at the end thereof, prior to the period, the
following:
"provided, however, the Borrower may convert from a limited
-------- -------
partnership into a newly formed domestic corporation that succeeds to all
assets, rights and liabilities of the Borrower (and no others) on a basis
reasonably satisfactory to the Bank (the 'Successor Corporation') so long
---------------------
as prior to the effectuation of such conversion, the Bank (as confirmed in
writing to the Borrower); (A) is reasonably satisfied that the Successor
Corporation shall be bound in full to all of the Obligations set forth in
the Loan Documents as if it were the Borrower, including without
limitation, the obligation to pay the Loan at the times and in the manner
set forth herein, (B) is reasonably satisfied that (i) prior to the
exercise of any of the options granted
<PAGE>
13
pursuant to the Option Agreement, the Borrower shall have executed and
delivered to the Bank or an Affiliate of the Bank a warrant agreement with
respect to non-voting common stock of such corporation (convertible to
voting shares at the option of any transferee of the Bank or its Affiliate
not subject to regulatory restrictions) in form and substance reasonably
satisfactory to the Bank, which shall grant to the Bank or such Affiliate
substantially the same rights it has pursuant to the Option Agreement and
the Barclays Letter Agreement prior to such sale and (ii) following the
exercise of any of the options granted pursuant to the Option Agreement,
the Bank Partnership Interests shall have been exchanged for shares of non-
voting common stock of such corporation (convertible to voting shares at
the option of any transferee of the Bank not subject to regulatory
restrictions) or other instrument, in form and substance reasonably
satisfactory to the holder or holders of the Bank Partnership Interests,
which shall grant to the holder or holders of the Bank Partnership Interest
substantially the same rights it or they have pursuant to the Partnership
Agreement and the Barclays Letter Agreement prior to such sale and (C)
shall have received, (i) the corporate documentation and proceedings of the
Successor Corporation, (iii) amendments to the Loan Documents (including,
without limitation, Sections 4, 6, 7 and 9 of this Agreement) to reflect
the conversion of the Borrower into the Successor Corporation, and (iii)
such other documentation and opinions of counsel, as requested by the Bank
with respect to such matters, each in form and substance reasonably
satisfactory."
5. Amendment of Subsection 6.17. Subsection 6.17 of the Loan
----------------------------
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:
"6.17 Financial Covenants. (a) Interest Coverage Ratio. The
------------------- -----------------------
Borrower covenants and agrees that the Interest Coverage Ratio shall be,
for the period of four consecutive fiscal quarters ending on the last day
of each March, June, September and December of each of the Fiscal Years of
the Borrower set forth below, not less than the ratio set forth below
opposite such day:
<TABLE>
<CAPTION>
Period of Four Fiscal
Quarters Ending on the
Following Dates: Ratio
---------------- -----
<S> <C>
March 31, 1994 1.25 to 1.00
June 30, 1994 1.25 to 1.00
September 30, 1994 1.50 to 1.00
December 31, 1994 1.50 to 1.00
March 31, 1995 1.50 to 1.00
June 30, 1995 1.50 to 1.00
September 30, 1995 1.50 to 1.00
</TABLE>
<PAGE>
14
<TABLE>
<S> <C>
December 31, 1995 1.50 to 1.00
March 31, 1996 1.75 to 1.00
June 30, 1996 1.75 to 1.00
September 30, 1996 1.75 to 1.00
December 31, 1996 1.75 to 1.00
March 31, 1997 2.00 to 1.00
June 30, 1997 2.00 to 1.00
September 30, 1997 2.00 to 1.00
December 31, 1997 2.00 to 1.00
March 31, 1998 2.25 to 1.00
June 30, 1998 2.25 to 1.00
September 30, 1998 2.25 to 1.00
December 31, 1998 2.25 to 1.00
March 31, 1999 2.50 to 1.00
June 30, 1999 2.50 to 1.00
September 30, 1999 2.50 to 1.00
December 31, 1999 2.50 to 1.00
March 31, 2000 2.50 to 1.00
June 30, 2000 2.50 to 1.00
September 30, 2000 2.50 to 1.00
December 31, 2000 2.50 to 1.00
March 31, 2001 2.50 to 1.00
June 30, 2001 2.50 to 1.00
September 30, 2001 2.50 to 1.00
December 31, 2001 2.50 to 1.00
March 31, 2002 2.50 to 1.00
June 30, 2002 2.50 to 1.00"
</TABLE>
(b) Fixed Charge Coverage Ratio. The Borrower covenants and agrees
---------------------------
that, prior to any material refinancing of the Indebtedness incurred
pursuant to the Senior Credit Agreement, the Fixed Charge Coverage Ratio
shall be, for and as of the last day of each Fiscal Year of the Borrower,
not less than 1.00 to 1.00.
(c) Minimum Net Worth. The Borrower covenants and agrees that the Net
-----------------
Worth of the Borrower and its Subsidiaries, on a combined basis, shall be,
as of the last day of each Fiscal Year of the Borrower set forth below, not
less than the amount set forth below opposite such Fiscal Year:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
1994 $13,125,000
1995 13,125,000
1996 13,125,000
1997 13,125,000
1998 15,750,000
1999 15,750,000
2000 15,750,000
2001 15,750,000"
</TABLE>
<PAGE>
15
6. Amendment of Section 6. Section 6 of the Loan Agreement is
----------------------
hereby amended by adding at the end thereof the following:
"6.20 Net Proceeds from a Takeout Financing or Initial Equity
-------------------------------------------------------
Issuance. The Borrower shall instruct any Person who would disburse the
--------
Net Proceeds from a Takeout Financing or Initial Equity Issuance to deposit
such Net Proceeds into the UBS Account (as defined in the Senior Credit
Agreement). In the event that, notwithstanding such instructions, the
Borrower receives any of such Net Proceeds, the Borrower shall immediately
deposit the same in the UBS Account. The Agent (as defined in the Senior
Credit Agreement) shall distribute the Net Proceeds from a Takeout
Financing or Initial Equity Issuance actually deposited in the UBS Account
in accordance with the provisions of subsection 3.2(B). The Agent agrees to
transfer all such Net Proceeds owing to the Bank by wire transfer to an
account requested by the Bank as soon as practicable, but not later than
the Business Day next succeeding the date of receipt of such Net Proceeds
in the UBS Account. Under no conditions shall the Borrower be entitled to
withdraw or issue checks or other instruments against the UBS Account with
respect to such Net Proceeds."
7. Amendment of Subsection 7.1. Subsection 7.1 of the Loan Agreement
---------------------------
is hereby amended by deleting such subsection in its entirety and substituting
in lieu thereof the following:
"7.1 Capital Expenditures. (a) Make or capitalize, directly or
--------------------
indirectly, or otherwise permit Capital Expenditures of the Borrower and
its Subsidiaries to exceed, in any Fiscal Year of the Borrower, or make any
commitment for any such Capital Expenditures or costs to be paid or
incurred during any such period, in excess of $8,000,000; provided that up
--------
to 100% of any such amount, if not so expended in the period for which it
is permitted above, may be carried over for expenditure in the next
following or any succeeding year; provided, further, that in no event shall
-------- -------
the aggregate amount of Capital Expenditures described in this clause (a)
in any Fiscal Year, after giving effect to any such carrying over of any
amount, exceed $8,500,000.
(b) Enter into a Capital Lease in any Fiscal Year of the Borrower
which, together with one or more Capital Leases, if any, entered into by the
Borrower and its Subsidiaries in such Fiscal Year, provides for aggregate value
of the assets financed under such Capital Lease or Capital Leases (as such
values are required under GAAP to be recorded on the Borrower's balance sheet)
of more than $2,000,000."
8. Amendment of Subsection 7.3. Subsection 7.3 of the Loan Agreement
---------------------------
is hereby amended by (a) deleting the word "and"
<PAGE>
16
appearing at the end of clause (j) thereof; (b) following clause (j) thereof,
adding the following:
"(k) Indebtedness arising under the Comcast Purchase Agreement
(including contractual indemnity obligations thereunder);
(l) Indebtedness under the Guaranteed Note;
(m) Indebtedness with respect to Guaranty Accrued Obligations;
(n) Indebtedness under the Converted Loan;
(o) the Special Subordinated Debt; and"
and (c) relettering clause (k) thereof as clause "(p)".
9. Amendment of Subsection 7.4(k). Subsection 7.4(k) of the Loan
------------------------------
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:
"(k) Investments outstanding on the New Closing Date and described on
Schedule 7.4 to the First Amendment hereto dated as of January 31, 1994;"
10. Amendment of Subsection 7.5. Subsection 7.5 of the Loan
---------------------------
Agreement is hereby amended by (a) deleting the parenthetical "(except that the
Borrower may change its name to Muzak Limited Partnership)" appearing in the
third and fourth lines thereof, (b) deleting the word "and" appearing at the end
of clause (k) thereof, (c) deleting the period at the end of clause (1) thereof
and substituting in lieu thereof the word "; and" and (d) adding at the end
thereof the following:
"(m) the formation of and the conversion of the Borrower into the
Successor Corporation in a manner permitted under subsection 6.6."
11. Amendment of Subsection 7.6(b). Subsection 7.6(b) of the Loan
------------------------------
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:
"(b) Make any payment or prepayment of principal of or interest on, or
purchase, defease, acquire or redeem the Guaranteed Loan, the Earn-Out
Note, the Class C Exchange Note, the Class C-1 Exchange Note, the Converted
Loan or the Special Subordinated Debt or make any deposit in respect
thereof or give notice in respect thereof, or suffer or permit any of its
Subsidiaries to do so, provided, however, that the Borrower may (i) make
-------- -------
any regular scheduled mandatory payment of interest when and as due and
payable
<PAGE>
17
with respect to the Converted Loan or the Special Subordinated Debt (in the
form as in effect on the date of execution thereof or as amended with the
prior written consent of the Bank) so long as at such time, such payment is
not prohibited under the provisions of the Subordinated Loan Documents,
(ii) make payment of principal, interest and fees on the Guaranteed Loan
solely, in the case of any payment of such principal, from the Net Proceeds
of a Takeout Financing, Special Subordinated Takeout Financing or Initial
Equity Issuance or by the conversion of the Guaranteed Loan into the
Converted Loan and the Converted Equity and (iii) so long as no Default or
Event of Default is continuing and such payment shall not cause a Default
or Event of Default to occur, (w) make the payment of interest when and as
due and payable on the Torrance Note, such payment being approximately in
the amount of $875,000 due on June 1, 1993 and payable on or about January
1, 1994, (x) subject to subsection (c) below, make payments with respect to
the Specified Transactions, (y) make distributions in respect of interest
on the Exchange Notes payable solely in additional Exchange Notes to the
holders of such Exchange Notes and (z) make payments of the Guaranty
Accrued Obligations."
12. Amendment of Subsection 7.7. Subsection 7.7 of the Loan Agreement
---------------------------
is hereby amended by (a) adding, following the words "Option Plan," appearing in
the third line thereof, the words "the Guaranty Accrued Obligations, the
Guaranteed Loan Guarantees and (b) adding following the word "business"
appearing in the ninth line thereof, the words "(provided, that a Special
--------
Subordinated Takeout Financing shall be permitted under this subsection 7.7
subject to the provisions in the following clause)".
13. Amendment of Subsection 7.8. Subsection 7.8 of the Loan Agreement
---------------------------
is hereby amended by (a) adding, following the words "Centre Partners,"
appearing in the second line thereof, the word "MLP,", (b) deleting the word
"and" appearing at the end of clause (iv) of the last sentence thereof and (c)
adding at the end of the last sentence thereof before the period the following:
", (vi) to make payments to Centre Partners of (1) of $50,000 on or about
November 23, 1993, (2) $324,000 on the New Closing Date upon the
consummation of the Comcast Acquisition), (3) $100,000 on the New Closing
Date (upon the execution by MLP of each of the Guaranteed Loan Documents to
which it is a party), and (4) $300,000 upon performance in full by MLP of
all of its obligations under the Guaranteed Loan Documents, (vi) so long as
no Default or Event of Default is continuing and such payment (individually
or in combination with other payments) shall not cause a Default or Event
of Default to occur, to make reimbursements of the Guaranty Accrued
Obligations and (vi) to make any regular,
<PAGE>
18
scheduled mandatory payments of interest when and as due and payable with
respect to the Special Subordinated Debt."
14. Amendment of Subsection 7.10. Subsection 7.10 of the Loan
----------------------------
Agreement is hereby amended by (a) deleting the words "or (iii)" appearing at
the end of clause (a)(ii) thereof and substituting in lieu thereof the
following:
", (iii) any material term, provisions or condition of the Comcast Purchase
Agreement or any other Comcast Purchase Document that materially adversely
affects the Bank (in such capacity only) in the reasonable opinion of the
Bank, (iv) any term of the Guaranteed Loan that would direct the payment by
the Borrower of the principal amount of the Guaranteed Note from any funds
other than from the Net Proceeds of a Takeout Financing, Initial Equity
Issuance or Special Subordinated Takeout Financing, or otherwise would have
a Material Adverse Effect, (v) the Converted Loan or the Special
Subordinated Debt, or (vi)".
15. Amendment of Section 9. Section 9 of the Loan Agreement is hereby
----------------------
amended by (a) adding at the end of clause (1) thereof the word "; or" and (b)
adding following clause (1) thereof the following:
"(m) (i) if the Takeout Financing occurs, failure by the Borrower to
repay the Loan, all accrued interest on the Loan and any fees or other
amounts payable hereunder on or prior to the Guaranteed Loan Maturity Date
with the Net Proceeds of the Takeout Financing or (ii) if the Takeout
Financing does not occur on or prior to the Guaranteed Loan Maturity Date,
failure by the Borrower to issue, on or before the date that is 90 days
following the Guaranteed Loan Maturity Date (A) the Converted Loan in an
aggregate principal amount not exceeding $5,000,000 and (B) the Converted
Equity in full satisfaction of the Guaranteed Loan; provided that (except
--------
as described in subsection 8.5 of the Guaranteed Note as in effect on the
New Closing Date) the number of units of Class A-2 Partnership Interests to
be issued as Converted Equity shall not exceed the number of Dollars by
which (x) the outstanding principal amount of the Guaranteed Loan prior to
such issuance exceeds (y) the principal amount of the Converted Loan;"
16. Conditions Precedent. Notwithstanding any other provisions of
--------------------
this First Amendment or the Loan Documents, and without affecting in any manner
the rights of Barclays under this Agreement and the Loan Documents, Barclays
shall have no obligation hereunder and this First Amendment shall not become
effective unless and until the following conditions precedent shall have
occurred:
(i) Barclays shall have received (A) this First Amendment, executed
and delivered by a duly authorized
<PAGE>
19
officer or partner of each party to the Loan Agreement and (B) the Senior
Credit Agreement, executed and delivered by a duly authorized officer of
each party thereto, together with a copy of all documents delivered in
connection therewith, in each case in form and substance satisfactory to
Barclays;
(ii) Barclays shall have received evidence satisfactory to it that the
New Closing Date under the Senior Credit Agreement shall have occurred; and
(iii) Barclays shall have received (A) evidence satisfactory to it
that each of the conditions described in Section 6.2, 6.5, 6.10, 6.15,
6.17, 6.22(b), 6.24, 6.26(iii) and (ix), 6.27, 6.28, 6.29, 6.30 and 6.31 of
the Senior Credit Agreement shall have been satisfied and (B) a copy of the
legal opinion of Arthur Block, counsel to the Transferors, on which
Barclays shall be entitled to rely, and the documents described in the
Sections referred to in clause (A) and the opinion described in clause (B)
of this paragraph shall in each case be in form and substance satisfactory
to Barclays; and
(iv) Barclays shall have received evidence satisfactory to it that all
fees, costs and expenses of counsel to Barclays relating to the
transactions contemplated by this First Amendment billed on or prior to the
date hereof shall been paid in full.
17. No Waiver. Except as expressly amended and waived hereby, all of the
---------
representations, warranties, terms, covenants and conditions of the Loan
Documents shall remain unamended and in effect in accordance with their
respective terms. The amendments and waivers set forth herein shall be limited
precisely as provided for herein and shall not be deemed to be waivers of,
amendments of, consents to or modifications of any term or provision of the Loan
Documents or any other document or instrument referred to therein or of any
transaction or further or future action on the part of the Borrower requiring
the consent of Barclays except only to the extent specifically provided for
herein. Barclays has not and shall not be deemed to have waived any of its
rights or remedies against the Borrower for any existing or future Defaults
except as set forth herein.
18. Representations; No Default. The Borrower (a) confirms, reaffirms and
---------------------------
restates the representations and warranties set forth in Section 4 of the Loan
Agreement on and as of the date hereof and after giving effect to this First
Amendment, except as disclosed in Section 12 of the Senior Credit Agreement, (b)
represents and warrants to Barclays that each of the representations and
warranties contained in Section 12 of the Senior Credit Agreement is true and
correct and (c) represents that no Default or Event of Default has occurred and
is continuing on and as of the date hereof and after giving effect to this First
Amendment.
<PAGE>
20
19. Capitalized Terms. Capitalized terms used herein without definition
-----------------
are used with the respective meanings given to them in the Loan Agreement.
20. Counterparts. This First Amendment may be executed by one or more of
------------
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
21. GOVERNING LAW. THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
-------------
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
21
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
executed and delivered by their respective officers, hereunto duly authorized,
as of the day and year specified at the beginning hereof.
BARCLAYS BANK PLC
By: [SIGNATURE ILLEGIBLE]
--------------------------------
Title:
MUZAK LIMITED PARTNERSHIP
By: MLP ACQUISITION, L.P., its
Managing General Partner
By: MUSIC HOLDINGS CORP.,
its General Partner
By:[SIGNATURE ILLEGIBLE]
----------------------
Title:
Consented to and Agreed:
UNION BANK OF SWITZERLAND, as
Agent under the Senior Credit Agreement
By:[SIGNATURE ILLEGIBLE]
--------------------------------
Title:
By:[SIGNATURE ILLEGIBLE]
--------------------------------
Title:
<PAGE>
================================================================================
MLP OPERATING, L.P.
(to be known as Muzak Limited Partnership)
________________________
SUBORDINATED LOAN AGREEMENT
________________________
Dated as of September 4, 1992
BARCLAYS BANK PLC, NEW YORK BRANCH
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
R E C I T A L S............................................................. 1
SECTION 1. DEFINITIONS.................................................. 1
1.1 Defined Terms................................................ 1
1.2 Other Definitional Provisions................................ 26
SECTION 2. LOAN FACILITY................................................ 26
2.1 The Loan..................................................... 26
2.2 Procedure for Borrowing...................................... 27
2.3 The Note..................................................... 27
SECTION 3. INTEREST RATE PROVISIONS; PAYMENTS;
OPTIONAL PREPAYMENTS; FEES; ORIGINAL
ISSUE DISCOUNT............................................. 27
3.1 Interest Rates and Payment Dates............................. 27
3.2 Optional Prepayments......................................... 28
3.3 Payments..................................................... 28
3.4 Facility Fee................................................. 29
3.5 Use of Proceeds.............................................. 29
3.6 Original Issue Discount...................................... 29
SECTION 4. REPRESENTATIONS AND WARRANTIES............................... 29
4.1 Limited Partnership and Corporate Status..................... 29
4.2 Power and Authority.......................................... 30
4.3 No Violation of Agreements................................... 31
4.4 No Litigation................................................ 32
4.5 Title to Properties, Liens................................... 32
4.6 Financial Statements and Condition........................... 33
4.7 Intellectual Property........................................ 34
4.8 Payment of Taxes............................................. 34
4.9 Governmental Action.......................................... 34
4.10 Disclosure................................................... 34
4.11 Regulation U................................................. 35
4.12 Investment Company........................................... 35
4.13 Employee Benefit Plans....................................... 35
4.14 Acquisition.................................................. 37
4.15 FCC Compliance............................................... 37
4.16 Permits, Etc................................................. 38
4.17 Environmental Status......................................... 40
4.18 Solvency..................................................... 40
4.19 Representations and Warranties in Other
Documents.................................................. 40
4.20 Certain Fees................................................. 40
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5. CONDITIONS PRECEDENT......................................... 40
5.1 Consummation of Acquisition and Related
Transactions............................................... 40
5.2 Execution of Agreement....................................... 41
5.3 Other Documents.............................................. 41
5.4 Opinions of Counsel.......................................... 41
5.5 Corporate Structure.......................................... 41
5.6 Qualification................................................ 42
5.7 Proceedings; Receipt of Documents............................ 42
5.8 No Litigation................................................ 43
5.9 Financial Condition and Solvency Certificate................. 44
5.10 Financial Statements of the Seller........................... 44
5.11 Facility Fees and Expenses................................... 45
5.12 Insurance.................................................... 45
5.13 Compliance with Law and Related Documents.................... 45
5.14 FCC Matters and Compliance................................... 46
5.15 Accountant's Tax Letter...................................... 46
5.16 Borrowing Certificate........................................ 46
5.17 Payment of Indebtedness by the Seller........................ 46
5.18 Senior Loan Documents........................................ 46
5.19 Contributions of Equity; Capitalization...................... 46
5.20 Representations and Warranties; No Default
or Event of Default........................................ 47
5.21 Partnership Interests........................................ 47
5.22 Letter of Direction.......................................... 47
5.23 Subordination Provisions..................................... 47
5.24 Fees......................................................... 47
5.25 Examination of Books......................................... 48
5.26 Other Seller Matters......................................... 48
5.27 Management................................................... 48
5.29 Name Changes................................................. 48
5.30 Accountant's Letter.......................................... 49
5.31 Additional Matters........................................... 49
SECTION 6. AFFIRMATIVE COVENANTS........................................ 49
6.1 Financial Statements and Other Information................... 49
6.2 Taxes and Claims............................................. 54
6.3 Insurance.................................................... 54
6.4 Books and Reserves........................................... 54
6.5 Properties in Good Condition................................. 55
6.6 Maintenance of Existence..................................... 55
6.7 Inspection by the Bank....................................... 55
6.8 Pay Indebtedness to Bank and Perform Other
Covenants.................................................. 55
6.9 Notice of Default............................................ 55
6.10 Reporting of Misrepresentations.............................. 56
6.11 Compliance with Laws, Etc.................................... 56
6.12 ERISA........................................................ 56
</TABLE>
- ii -
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
6.13 Further Assurances........................................... 58
6.14 Environmental Matters........................................ 59
6.15 Subsidiaries................................................. 61
6.16 Board Observation Rights..................................... 61
6.17 Financial Covenants.......................................... 61
6.18 Guaranties................................................... 63
6.19 Access to Accountants........................................ 63
SECTION 7. NEGATIVE COVENANTS........................................... 63
7.1 Capital Expenditures......................................... 63
7.2 Liens........................................................ 64
7.3 Indebtedness................................................. 64
7.4 Loans, Investments and Guaranties............................ 65
7.5 Merger, Sale of Assets, Dissolution, Etc..................... 68
7.6 Dividends, Redemptions and Other Payments.................... 69
7.7 Transactions with Affiliates................................. 70
7.8 Compensation and Fees........................................ 70
7.9 Noncompliance with ERISA..................................... 71
7.10 Amendment and Modification of Purchase
Documents and Other Documents.............................. 72
7.11 Fiscal Year.................................................. 72
7.12 Limitation on Formation of Subsidiaries...................... 72
7.13 Change of Business........................................... 73
SECTION 8. SUBORDINATION................................................ 73
8.1 Subordination of Loan to Senior Indebtedness................. 73
8.2 Subordination Upon Bankruptcy or Insolvency.................. 74
8.3 Subordination Upon Default or Acceleration of
Senior Indebtedness........................................ 75
8.4 Bank's Rights and Remedies................................... 76
8.5 Subrogation to Rights of Senior Debt Holders................. 76
8.6 No Waiver of Subordination Provisions........................ 77
8.7 Reliance on Judicial Order or Certificate
of Liquidating Agent....................................... 77
8.8 Bank Entitled to Assume Payments Not
Prohibited in Absence of Notice............................ 78
8.9 Information as to Subordination.............................. 78
8.10 Effect of Failure to Pay Loan................................ 78
8.11 Reliance..................................................... 78
8.12 Amendments................................................... 79
SECTION 9. EVENTS OF DEFAULT............................................ 79
SECTION 10. MISCELLANEOUS................................................ 82
10.1 Amendments and Waivers....................................... 82
10.2 Notices......................................................
10.3 No Waiver; Cumulative Remedies...............................
10.4 Survival of Representations and Warranties...................
</TABLE>
- iii -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.5 Payment of Expenses and Taxes;
Indemnification............................................ 84
10.6 Successors and Assigns....................................... 85
10.7 Severability................................................. 87
10.8 Counterparts................................................. 88
10.9 SUBMISSION TO JURISDICTION................................... 88
10.10 GOVERNING LAW................................................ 88
10.11 Third Party Rights........................................... 88
10.12 Entire Agreement............................................. 89
10.13 Disclosure of Financial Information.......................... 89
10.14 Maintenance of Confidentiality............................... 89
10.15 Non-Recourse to Partners..................................... 90
10.16 WAIVER OF JURY TRIAL......................................... 90
</TABLE>
- iv -
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
<C> <S>
A Form of Note
B-1 Form of Opinion of Counsel for the Borrower
B-2 Form of Opinion of Delaware Counsel for the Borrower
B-3 Form of Opinion of Counsel for the Seller
C Form of Borrowing Certificate
D Form of Option Agreement
E-1 Form of Earn-out Note Subordination Agreement
E-2 Form of Exchange Note Subordination Agreement
F Executive Agreements
G Form of FCC Lease
H Form of Management Notes
I Form of Management Option Plan
J Form of Barclays Letter Agreement
K Form of Torrance Note
L Indemnity Agreement
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<C> <S>
1.1(A) Permitted Liens
1.1(B) Pro Forma
1.1(C) FCC Licenses
1.1(D) Muzak Management
1.1(E) Management Notes
1.1(F) Channel Capacity Provider
4.1 Subsidiaries and Capitalization; Jurisdictions in
which Qualified to do Business; Equity Interests
4.3 Defaults under Contractual Obligations; Violations
of Law or Corporate Documents
4.4 Litigation
4.5 Exceptions to Title to Properties; Leases and
Tangible Assets
4.6(A) Financial Condition
4.6(B) Projections
4.7 Intellectual Property
4.13 Employee Plans
4.15 FCC Governmental Permits
4.16 Other Governmental Permits
4.17 Environmental Violations and Use of Hazardous
Materials
4.20 Fees
7.3 Existing Indebtedness
7.4 Existing Investments
</TABLE>
- v -
<PAGE>
SUBORDINATED LOAN AGREEMENT, dated as of September 4, 1992 (as
amended, supplemented or otherwise modified from time to time, the "Agreement"),
---------
between MLP OPERATING, L.P., a Delaware limited partnership (the "Borrower") and
--------
BARCLAYS BANK PLC, NEW YORK BRANCH (the "Bank").
----
R E C I T A L S
---------------
WHEREAS, the Borrower, Muzak Limited Partnership (to be known after
the Closing Date as MLP Limited Partnership), a Delaware limited partnership
(including its successors and assigns, the "Seller"), Field/Muzak, Inc. and The
------
Field Corporation are parties to an Asset Purchase Agreement dated as of March
11, 1992 (as amended by Amendment No. 1, dated as of June 26, 1992, Amendment
No. 2, dated as of July 31, 1992, and Amendment No. 3, dated as of August 26,
1992, and as may be further amended, modified or supplemented from time to time
in accordance with the terms thereof and hereof, the "Purchase Agreement"),
------------------
pursuant to which the Borrower shall, on the Closing Date (as defined herein),
purchase substantially all of the assets of the Seller and the equity interests
in the Special Subsidiaries (as further described in Section 1.1 of the Purchase
Agreement, the "Assets") and assume certain of the liabilities of the Seller
------
(the "Acquisition"), all as set forth in the Purchase Agreement;
-----------
WHEREAS, the Borrower has requested that the Bank make a loan (the
"Loan") in the principal amount of $7,500,000 to the Borrower, to be evidenced
----
by a promissory note (the "Note"), substantially in the form of Exhibit A
----
hereto, the proceeds of which shall be applied by the Borrower towards a portion
of the cash purchase price of the Acquisition, certain non-compete payments and
to pay related costs and expenses; and
WHEREAS, the Bank is willing to make the Loan on the terms and subject
to the conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. DEFINITIONS
-----------
1.1 Defined Terms. As used in this Agreement the following terms
-------------
shall have the following respective meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
<PAGE>
2
"Acquisition" shall have the meaning set forth in the preamble to this
-----------
Agreement.
"Administrative General Partner" shall mean MLP Administration Corp.,
------------------------------
a Delaware corporation, in its capacity as administrative general partner
under the Partnership Agreement.
"Affiliate" of any specified Person shall mean any other Person
---------
directly or indirectly controlling or controlled by or under common control
with such specified Person or which is a director, officer or partner
(limited or general) of such specified Person, provided that, for purposes
--------
of this definition, the Bank, the Senior Lenders, the Seller and their
respective Affiliates shall not be an "Affiliate" of the Borrower. For the
purposes of this definition, "control", when used with respect to any
specified Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. For the purpose of this definition (and
without limiting such definition in any manner), each of the Partners
(other than the Bank, the Senior Lenders, the Seller and their respective
Affiliates), their respective Affiliates, and the officers and directors of
the Borrower shall be deemed to control the Borrower and its Subsidiaries
and shall be an Affiliate of the Borrower and its Subsidiaries.
"Agreement" shall have the meaning set forth in the preamble to this
---------
Agreement.
"Assets" shall have the meaning set forth in the preamble to this
------
Agreement, and shall also include all of the Borrower's machinery, data
processing hardware and software, furniture, fixtures, dies, tools, jigs,
office equipment and other tangible personal property of the Borrower, and
all accessions, accretions, and additions to Equipment (as defined in the
Senior Credit Agreement), and all other component and auxiliary parts used
or to be used in connection with or attached to any of the same, wherever
located, whether now owned or hereafter acquired.
"Bank" shall have the meaning set forth in the preamble hereto.
----
"Bank Partnership Interests" shall mean, following the exercise of the
--------------------------
option granted pursuant to the Option Agreement, the Class A-2 non-voting
limited partnership interests in the Borrower held by the Bank or its
registered assigns or any other equity interests in the Borrower held by
the Bank.
<PAGE>
3
"Bankruptcy Code" shall mean the Bankruptcy Code, 11 U.S.C. 101 et
--------------- --
seq., as amended, and any similar or successor Federal statute, and the
----
rules and regulations thereunder, all as the same shall be in effect at the
time.
"Barclays Letter Agreement" shall mean that letter agreement to be
-------------------------
entered into between the Borrower, the Bank and each of the other parties
thereto, substantially in the form of Exhibit J, as the same may be
amended, supplemented or otherwise modified from time to time.
"Barclays Partnership Documents" shall mean the collective reference
------------------------------
to the Barclays Letter Agreement, the Option Agreement and the Indemnity
Letter.
"Bill of Sale" shall have the meaning set forth in the Purchase
------------
Agreement.
"Borrower" shall have the meaning set forth in the preamble to this
--------
Agreement, it being understood that on the Closing Date the Borrower shall
change its name from MLP Operating, L.P. to Muzak Limited Partnership.
"Business Day" shall mean a day other than a Saturday, Sunday or other
------------
day on which banks in New York City are authorized or required to close.
"Capital Expenditures" shall mean, for any fiscal period as determined
--------------------
in accordance with GAAP, all expenditures (whether made in the form of cash
or other property, including, without limitation, expenditures made by
exchanging or trading in property) for, or contracts for expenditures with
respect to, any fixed assets or improvements, or for replacements,
substitutions or additions thereto, that have a useful life of more than
one year, including, but not limited to payments on account of (i) the
direct or indirect acquisition of such assets by way of increased product
or service charges, offset items or otherwise, (ii) any Liens described in
clause (g) of the definition of "Permitted Encumbrances" and (iii) Capital
Leases.
"Capital Lease" of any Person shall mean any lease of any property
-------------
(whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is, or is required to be, accounted for as a capital
lease on the balance sheet of such Person.
"Capitalized Lease Obligations" of any Person shall mean at any time
-----------------------------
all obligations under Capital Leases of such Person in each case taken at
the amount thereof accounted for as liabilities at such time in accordance
with GAAP.
<PAGE>
4
"Cash Interest Expense" of the Borrower and its Subsidiaries for each
---------------------
of the most recent four consecutive fiscal quarter periods, shall mean the
aggregate amount of cash required to be applied to Interest Expense by the
Borrower and its Subsidiaries during such period.
"CCI" shall mean Centre Capital Investors L.P., a Delaware limited
---
partnership.
"Centre Partners" shall mean Centre Partners L.P., a Delaware limited
---------------
partnership.
"Centre Partners Entities" shall mean Centre Partners and other
------------------------
entities under the exclusive management control of Centre Partners and of
which Centre Partners maintains sole controlling interest and owns at least
a 50% equity interest.
"Certifying Officer" shall mean the chief executive officer or the
------------------
chief financial officer of the Borrower.
"Channel Capacity" shall mean any capacity for transmission of
----------------
programming material, data or other intelligence.
"Channel Capacity Providers" shall mean those parties which provide,
--------------------------
and those parties which may in the future provide, any Channel Capacity to
the Borrower or to any of its FCC Affiliates, whether by lease, joint
venture, cost-sharing arrangement, or any other agreement or arrangement;
the term "Channel Capacity Providers" shall include, without limitation,
the respective FCC licensees of those FM broadcast and/or other stations
from which the Borrower leases a sub-carrier channel or other Channel
Capacity from time to time, including, without limitation, those channels
of communication leased on the Closing Date pursuant to leases listed on
Schedule 1.1(F).
"Class A-1 Limited Partners" shall mean Centre Partners, CCI and any
--------------------------
other Person designated as a Class A-1 Limited Partner under the
Partnership Agreement.
"Class A-1 Partnership Interests" shall mean the class A-1 limited
-------------------------------
partnership interests of the Borrower issued pursuant to the Partnership
Agreement and held on the Closing Date by Centre Partners Entities.
"Class A-2 Limited Partners" shall mean (i) UBS or an Affiliate of
--------------------------
UBS, (ii) Mr. John Hawkins, (iii) following the exercise of any option
pursuant to the Option Agreement, the Bank or any Affiliate of the Bank and
(iv) any other Person designated from time to time as a Class A-2 Limited
Partner under the Partnership Agreement.
<PAGE>
5
"Class A-2 Partnership Interests" shall mean the class A-2 limited
-------------------------------
partnership interests of the Borrower issued pursuant to the Partnership
Agreement and held on the Closing Date by UBS (or an Affiliate of UBS) and
Mr. John A. Hawkins and which may be acquired (i) pursuant to the Option
Agreement by the Bank or any Affiliate of the Bank, (ii) by a Senior Lender
under the Senior Credit Agreement or (iii) pursuant to the Partnership
Agreement.
"Class B Limited Partners" shall mean and include certain members of
------------------------
Muzak Management and any other Person designated from time to time as a
Class B Limited Partner under the Partnership Agreement.
"Class B Partnership Interests" shall mean the class B limited
-----------------------------
partnership interests of the Borrower issued pursuant to the Partnership
Agreement and held on the Closing Date by certain members of Muzak
Management.
"Class C Limited Partners" shall mean the Seller and any other Person
------------------------
designated as a Class C Limited Partner under the Partnership Agreement.
"Class C Partnership Interests" shall mean the Class C limited
-----------------------------
partnership interests of the Borrower issued pursuant to the Partnership
Agreement and held on the Closing Date by the Seller.
"Closing Date" shall mean the date on which the Bank makes the Loan.
------------
"Code" shall mean, at any date, the Internal Revenue Code of 1986, as
----
the same shall be in effect at such date, and the regulations thereunder.
"Collateral" shall have the meaning set forth in the Senior Credit
----------
Agreement.
"Communications Act" shall mean the Communications Act of 1934, as
------------------
amended.
"Confidential Information" shall have the meaning set forth in
------------------------
subsection 10.14.
"Contingent Obligations" of any Person shall mean any direct or
----------------------
indirect liability of that Person (i) with respect to any indebtedness,
lease, dividend, letter of credit or other obligation of another if the
primary purpose or intent by the Person incurring such liability is to
provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof; (ii) under any letter of credit issued for the account of that
<PAGE>
6
Person or for which that Person is otherwise liable for reimbursement
thereof; (iii) net obligations under any Hedge Agreement; or (iv) to
advance or supply funds or otherwise to assure or hold harmless the owner
of a primary obligation against loss in respect thereof. Contingent
Obligations shall include, without limitation, (a) the direct or indirect
guarantee, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale
with recourse by such Person of the obligation of another and (b) any
liability of such Person for the obligations of another through any
agreement (contingent or otherwise) (i) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form
of loans, advances, stock purchases, capital contributions or otherwise);
(ii) to maintain the Solvency or any balance sheet item, level of income or
financial condition of another or (iii) to make take-or-pay or similar
payments if required regardless of nonperformance by any other party or
parties to an agreement, if in the case of any agreement described under
subclauses (i) or (ii) of this sentence the primary purpose or intent
thereof is as described in the immediately preceding sentence. The amount
of any Contingent Obligation shall be equal to the amount of the obligation
so guaranteed or otherwise supported.
"Contractual Obligation" as applied to any Person, shall mean any
----------------------
provision of any security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement or
other instrument to which that Person is a party or by which it or any of
its properties is bound or to which it or any of its properties is subject,
including the Purchase Documents.
"Credit Parties" shall mean and include the Borrower and its
--------------
Subsidiaries, if any.
"Current Assets" shall mean all assets of the Borrower and its
--------------
Subsidiaries, determined on a combined basis, that would, in accordance
with GAAP, be classified as current assets, after deducting adequate
reserves in each case in which a reserve is proper in accordance with GAAP.
"Current Liabilities" shall mean all liabilities of the Borrower and
-------------------
its Subsidiaries, determined on a combined basis (excluding current
maturities (that is, those that will become due within 12 months following
the date of determination) for Indebtedness for Borrowed Money), that
would, in accordance with GAAP, be classified as current liabilities.
"Default" shall mean any of the events specified in Section 9, whether
-------
or not any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
<PAGE>
7
"Disclosure Schedules" shall mean all schedules delivered by the
--------------------
Seller pursuant to the Purchase Agreement.
"Distributable Income Taxes" shall mean, for any tax period (including
--------------------------
any quarterly estimated tax period) (but only for such periods as the
Borrower is treated as a partnership under the Code), distributions by the
Borrower to any Person who is treated as a taxpayer with respect to the
Partnership Interests (including for these purposes any Person who is a
taxpayer with respect to Put/Call Units covered by the Option Agreement) to
enable such Person to discharge any cash tax liabilities incurred by such
Person solely as a result of such Person's Partnership Interest in the
Borrower; provided, however, that the amount distributed to all Persons
-------- -------
shall not exceed in the aggregate the lesser of (x) the product of (i) the
taxable income of the Borrower that the Borrower reports (or would report
for all such tax periods if a return were due) for Federal income tax
purposes determined as if the Borrower were a separately taxable entity and
(ii) a percentage equal to the lesser of (a) 60% or (b) the sum of (1) the
highest marginal Federal income tax rate applicable to individuals or, if
higher, the highest marginal Federal income tax rate applicable to
corporations in effect for such tax period and (2) the product of (r) the
highest marginal combined New York State and New York City income tax rate
applicable to individuals or, if the corporate rate is determined to be the
applicable rate in clause (x)(ii)(b)(1) hereof, the highest marginal
combined New York State and New York City income tax rate applicable to
corporations, in effect for such tax period and (s) 1 minus the marginal
Federal income tax rate determined for such tax period pursuant to clause
(x)(ii)(b)(1) hereof, and (y) the product of (i) the sum of the taxable
income and taxable loss of the Borrower that the Borrower reports for
Federal income tax purposes for all tax periods that the Borrower has been
in existence determined as if the Borrower were a separate taxable entity
and (ii) a percentage equal to the lesser of (a) 60% or (b) the sum of (1)
the highest marginal Federal income tax rate applicable to individuals or,
if higher, the highest marginal Federal income tax rate applicable to
corporations in effect for such tax period and (2) the product of (r) the
highest marginal combined New York State and New York City income tax rate
applicable to individuals or, if the corporate rate is determined to be the
applicable rate in clause (y)(ii)(b)(1) hereof, the highest marginal
combined New York State and New York City income tax rate applicable to
corporations, in effect for such tax period and (s) 1 minus the marginal
Federal income tax rate determined for such tax period pursuant to clause
(y)(ii)(b)(1) hereof.
"Dollars" and "$" shall mean dollars in lawful currency of the United
------- -
States of America.
<PAGE>
8
"Earn-Out Note" shall mean the promissory note to be made by the
-------------
Borrower in favor of the Seller pursuant to Section 2.5(b) of the Purchase
Agreement, substantially in the form of Exhibit A to the Purchase
Agreement.
"Earn-Out Note Subordination Agreement" shall mean the Earn-Out Note
-------------------------------------
Subordination Agreement, substantially in the form of Exhibit E-1, to be
entered into among the Borrower, the Bank, the Senior Lenders, and the
Seller, as amended, supplemented or otherwise modified from time to time.
"Earn-Out Payment" shall mean that certain earn-out payment to the
----------------
extent payable by the Borrower pursuant to the terms of Section 2.5 of the
Purchase Agreement (as in effect on the Closing Date or otherwise amended
with the written consent of the Bank) and subsection 7.6(c) and is
otherwise not prohibited by the Senior Credit Agreement.
"EBITDA" of the Borrower and its Subsidiaries for any period shall
------
mean, determined on a combined basis in accordance with GAAP, the sum of
(i) the Net Income from operations of the Borrower and its Subsidiaries for
such period, without giving effect to (x) any extraordinary or non-
recurring gains (losses) (not in the ordinary course of business) or (y)
other gains (losses) from the sale of assets (other than the sale of
Inventory in the ordinary course of business); plus (ii) to the extent that
----
any of the items referred to in any of clauses (A) through (C) below were
deducted in calculating such Net Income: (A) Interest Expense of the
Borrower and its Subsidiaries for such period; (B) management related
expenses of the Borrower, its Subsidiaries and the Managing General Partner
with respect to their operations for such period (such as, by way of
example, tax, legal and audit expenses and directors' fees of the
corporation which is the managing general partner of the Managing General
Partner, which directors' fees shall not exceed $100,000 (plus cost of
living increases not to exceed 5%; per annum) in the aggregate for any one
calendar year); and (C) the amount of all non-cash charges (including,
without limitation, depreciation and amortization and non-cash charges
relating to the Management Option Plan) of the Borrower and its
Subsidiaries for such period; minus (plus) (iii) the amount of all non-cash
gains (losses) included in determining such Net Income for such period.
"Employee Plan" shall mean an "employee benefit plan" as defined in
-------------
Section 3(3) of ERISA other than a Multiemployer Plan, which is maintained
for, or contributions are made on behalf of, employees of (i) any Credit
Party or (ii) any ERISA Affiliate.
"Environmental Law" shall mean the Comprehensive Environmental
-----------------
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act
<PAGE>
9
of 1976, as amended, any "Superfund" or "Superlien" law, the Hazardous
Materials Transportation Act, as amended, the Federal Water Pollution
Control Act, as amended, the Clean Air Act, as amended, the Toxic
Substances Control Act, as amended, and any other Federal, state, or local
statute, rule, regulation, ordinance, interpretation, order, judgment, or
decree, as now or at any time hereafter amended or in effect and applicable
to the Borrower and its Subsidiaries, regulating, relating to or imposing
liability or standards of conduct concerning the manufacture, processing,
distribution, use, treatment, handling, storage, disposal, or
transportation of Hazardous Materials, or air emissions, water discharges,
noise emissions, or otherwise concerning the protection of the outdoor or
indoor environment.
"ERISA" shall mean, at any date, the Employee Retirement Income
-----
Security Act of 1974 and the regulations promulgated and rulings issued
thereunder, all as the same shall be in effect at such date.
"ERISA Affiliate" shall mean any Person that for purposes of Title I
---------------
and Title IV of ERISA and Section 412 of the Code is (i) a member of the
controlled group of, or under common control with (within the meaning of
-------
Section 414 of the Code and the regulations promulgated and the rulings
issued thereunder) any Credit Party (or, to the extent that the Bank has
recourse to it under a Guaranty, any Guarantor), or (ii) solely for
purposes of subsections 6.12, 7.9, 9(i) and 4.13 (except as otherwise
specified in such subsections), a member of the controlled group of, or
under common control with (within the meaning of Section 414 of the Code
and the regulations promulgated and the rulings issued thereunder) CCI or
any Credit Party (or, to the extent that the Bank has recourse to it under
a Guaranty, any Guarantor); provided, that delivery by the Borrower of any
--------
(x) notice pursuant to subsection 6.12 or (y) representation or schedule
pursuant to subsection 4.13 shall not, in and of itself, be construed as an
admission that CCI is in a controlled group or under common control with
any Credit Party (or such Guarantor) within the meaning of Section 414 of
the Code and the regulations promulgated and the rulings issued thereunder.
"ERISA Event" shall mean, with respect to any Credit Party or any
-----------
ERISA Affiliate and with respect to any Pension Benefit Plan subject to
Title IV of ERISA or Section 412 of the Code, (a) a Reportable Event, (b)
the withdrawal of any Credit Party or any ERISA Affiliate from a Pension
Benefit Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, but only to the extent that such
withdrawal results in the assessment of a material withdrawal liability
with respect to any Credit Party or any ERISA Affiliate, (c) the failure
<PAGE>
10
to make required contributions which would result in the imposition of a
Lien under Section 412 of the Code or Section 302 of ERISA, or (d) any
other event or condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Benefit Plan or to
cause the imposition of any material liability on any Credit Party or any
ERISA Affiliate under Title IV of ERISA.
"Event of Default" shall mean any of the events specified in Section
----------------
9, provided that any requirement for the giving of notice, the lapse of
--------
time, or both, or any other condition, event or act has been satisfied.
"Exchange Notes" shall mean the promissory note(s) to be made by the
--------------
Borrower in favor of the Seller pursuant to Section 16.02 of the
Partnership Agreement, substantially in the form of Exhibit A to the
Partnership Agreement.
"Exchange Note Subordination Agreement" shall mean the Exchange Note
-------------------------------------
Subordination Agreement, substantially in the form of Exhibit E-2, to be
entered into among the Borrower, the Bank, the Senior Lenders and the
Seller, as amended, supplemented or otherwise modified from time to time.
"Executive Agreements" shall mean the executive compensation
--------------------
agreements between the Borrower and Muzak Management from time to time, and
on the Closing Date shall mean the executive compensation agreements
contained in Exhibit F attached hereto.
"FCC" shall mean the Federal Communications Commission.
---
"FCC Affiliates" shall mean at any time each General Partner,
--------------
Subsidiary, Guarantor, Music Holdings, MLP Communications Company and each
General Partner of MLP Communications Company.
"FCC Lease" shall mean those certain lease agreements between the
---------
Borrower and MLP Communications Company for the leasing by the Borrower of
channel capacity under the FCC Licenses in substantially the form attached
hereto as Exhibit G.
"FCC Licenses" shall mean the FCC licenses listed on Schedule 1.1(C),
------------
and any and all other licenses, permits and authorizations which may
hereafter be issued by the FCC to MLP Communications Company (or, if issued
to the Borrower or any other FCC Affiliate, transferred (or required to be
transferred) to MLP Communications Company pursuant to the terms of Section
9.7(d) of the Senior Credit Agreement).
"FCC Rules" shall mean the FCC rules and regulations as set forth in
---------
Title 47 of the Code of Federal Regulations,
<PAGE>
11
and the FCC's policies thereunder and under the Communications Act as in
effect from time to time.
"Financial Statements" shall have the meaning set forth in subsection
--------------------
5.10(a).
"Fiscal Year" shall mean, with respect to the Borrower and its
-----------
Subsidiaries, a period beginning on the first day after the last day of the
preceding "Fiscal Year" of the Borrower and ending on the next following
December 31st, except, that, the Fiscal Year for 1992 of the Borrower and
------ ----
its Subsidiaries shall commence on the open of business on September 1,
1992 and end on December 31, 1992.
"Fixed Charge Coverage Ratio" shall mean, for any Fiscal Year of the
---------------------------
Borrower and its Subsidiaries on a combined basis, the ratio obtained by
dividing (a) the difference of (i) EBITDA for such Fiscal Year, minus (ii)
-----
the sum of (x) Capital Expenditures plus (y) Distributable Income Taxes, in
----
each case for such Fiscal Year, by (b) the sum of (i) scheduled mandatory
principal payments on Indebtedness for Borrowed Money deducted under clause
(D) of the definition of Excess Cash Flow (as defined in the Senior Credit
Agreement) for such Fiscal Year, plus (ii) Cash Interest Expense for such
----
Fiscal Year.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America as in effect from time to time consistent with
those applied in the preparation of the financial statements of such
Person.
"General Partners" shall mean the Managing General Partner and the
----------------
Administrative General Partner.
"German Licensee Shares" shall have the meaning set forth for such
----------------------
term in the Purchase Agreement.
"Government Body" shall mean any federal, state, local or foreign
---------------
governmental authority or regulatory body, any subdivision, agency,
commission or authority thereof or any quasi-governmental or private body
exercising any governmental regulatory authority thereunder and any Person
directly or indirectly owned by and subject to the control of any of the
foregoing, or any court, arbitrator or other judicial or quasi-judicial
tribunal.
"Governmental Permits" shall mean all licenses, franchises, permits,
--------------------
privileges, immunities, approvals, and other authorizations from a
Governmental Body.
"Governmental Rule" shall mean any statute, law, treaty, rule, code,
-----------------
ordinance, regulation, permit, certificate or order of any Governmental
Body or any judgment, decree, injunction, writ, order or like action of any
Governmental Body.
<PAGE>
12
"Guarantors" shall mean, at any time, each of the Borrower's present
----------
or future Subsidiaries (other than (i) MLP Communications Company, (ii)
prior to the third Business Day following the Closing Date, the Special
Subsidiary owning assets in the State of Washington, (iii) prior to the
thirty-fifth day following the Closing Date, the Special Subsidiary owning
assets in the State of California, and (iv) prior to the date which is 190
days following the Closing Date, the Special Subsidiary owning assets in
the State of New York and Melody, Inc. of Delaware), which shall, in each
case, execute a Guaranty.
"Guaranty" shall have the meaning set forth in subsection 6.18.
--------
"Hazardous Material" shall mean any pollutant, contaminant, chemical,
------------------
or industrial or hazardous, toxic or dangerous waste, substance or
material, defined or regulated as such in (or for purposes of) any
Environmental Law and any other toxic, reactive, or flammable chemicals,
including (without limitation) any asbestos, any petroleum (including crude
oil or any fraction), any radioactive substance and any polychlorinated
biphenyls; provided, in the event that any Environmental Law is amended so
--------
as to broaden the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment; and
provided, further, to the extent that the applicable laws of any state
-------- -------
establish a meaning for "hazardous material," "hazardous substance,"
"hazardous waste," "solid waste" or "toxic substance" which is broader than
that specified in any Environmental Law, such broader meaning shall apply.
"Hedge Agreement" shall have the meaning set forth in clause (v) of
---------------
the definition of Indebtedness.
"Indebtedness" of any Person shall mean all items which, in accordance
------------
with GAAP, would be included in determining total liabilities of such
Person as shown on the liability side of a balance sheet as at the date
Indebtedness of such Person is to be determined and, in any event, shall
include (without limitation and without duplication) (i) all Indebtedness
for Borrowed Money of such Person; (ii) any liability of such Person
secured by any Lien on property owned or acquired by such Person, whether
or not such liability shall have been assumed; (iii) all Contingent
Obligations of such Person; (iv) the Earn-Out Payment; and (v) all
obligations (other than obligations to pay fees in connection therewith) of
such Person in respect of interest rate swap agreements, currency swap
agreements and other similar agreements designed to hedge against
fluctuations in interest rates or foreign exchange rates (each, a "Hedge
-----
Agreement").
---------
<PAGE>
13
"Indebtedness for Borrowed Money" of any Person shall mean, without
-------------------------------
duplication, all Indebtedness for borrowed money or evidenced by notes,
bonds, debentures or similar evidences of Indebtedness of such Person, all
obligations of such Person for the deferred and unpaid purchase price of
any property, service or business (other than trade and other accounts
payable incurred in the ordinary course of business and constituting
Current Liabilities and the Earn-Out Payment at any time prior to the date
it becomes due and payable), and all obligations of such Person under
Capital Leases.
"Indemnity Letter" shall mean the Indemnification Agreement between
----------------
the Borrower and the Bank entered into in connection with the Option
Agreement, substantially in the form of Exhibit L, as the same may be
amended, supplemented or otherwise modified.
"Independent Franchise Affiliate" shall mean any party (other than the
-------------------------------
Borrower) to a franchise agreement with the Borrower in which the Borrower
has no equity interest.
"Intellectual Property" shall mean the "Proprietary Rights" (as such
---------------------
term is defined in the Purchase Agreement) acquired by the Borrower from
the Seller in the Acquisition, and all similar property hereafter acquired,
including, without limitation, all trademarks, tradenames, trade secrets,
servicemarks, patents and licenses (other than the FCC Licenses) acquired
by the Borrower from the Seller on the Closing Date or hereafter acquired
by the Borrower or any Subsidiary.
"Interest Coverage Ratio" shall mean, for any four consecutive fiscal
-----------------------
quarter period, the ratio obtained by dividing (a) EBITDA of the Borrower
and its Subsidiaries on a combined basis minus Capital Expenditures for
such fiscal period, by (b) Cash Interest Expense for such fiscal period.
"Interest Expense" shall mean, with respect to any Person for any
----------------
fiscal period, the excess, if any, of (i) cash interest expense of such
Person during such period determined in accordance with GAAP, and shall
include in any event, without limitation, interest expense with respect to
Indebtedness for Borrowed Money over (ii) interest income of such Person
for such period.
"Interest Payment Date" shall mean (i) the twentieth day of March and
---------------------
September in each year, commencing March 20, 1993 and (ii) the Termination
Date.
"Inventory" of any Person shall mean any and all inventory, raw
---------
materials, work-in-process and finished products of such Person, now or
hereafter acquired, intended for sale or lease or to be finished under
contracts of service in the ordinary course of business of such Person,
<PAGE>
14
of every kind and description, in the custody or possession, actual or
constructive, of such Person including such inventory as is temporarily out
of the custody or possession of such Person.
"Joint Venture" shall mean a joint venture, partnership or other
-------------
similar arrangement, whether in corporate, partnership or other legal form.
"Latest Projections" shall have the meaning set forth in subsection
------------------
5.29.
"Lease" shall mean each lease or sublease of real property existing on
-----
the date hereof under which the Borrower or any of its Subsidiaries is the
lessee or sublessee and each future lease or sublease of real property
under which the Borrower or any of its Subsidiaries is the lessee or
sublessee.
"Lien" shall mean any lien, mortgage, pledge, security interest or
----
other type of charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation, the lien or
retained security title of a conditional vendor and any easement, right of
way or other encumbrance on title to real property and any financing
statement filed in respect of any of the foregoing. For the purposes of
this Agreement, a Credit Party shall be deemed to be the owner of any
property which it has placed in trust for the benefit of the holder of
Indebtedness of such Credit Party which Indebtedness is deemed to be
extinguished under GAAP but for which such Credit Party remains legally
liable, and such trust shall be deemed to be a Lien.
"Limited Partners" shall mean and include the Class A-1 Limited
----------------
Partners, Class A-2 Limited Partners, Class B Limited Partners and Class C
Limited Partners, each being limited partners of the Borrower.
"Loan" shall have the meaning ascribed thereto in the Recitals.
----
"Loan Documents" shall be the collective reference to this Agreement,
--------------
the Note, the Guaranties and each Subordination Agreement.
"Management Notes" shall mean, collectively, promissory notes in an
----------------
aggregate principal amount not to exceed $600,000, in substantially the
form attached hereto as Exhibit H, representing indebtedness payable to the
Borrower by certain members of Muzak Management with respect to loans made
by the Borrower on the Closing Date to facilitate the purchase of Class B
Partnership Interests, which management notes shall have a final maturity
of not later than the fourth anniversary of the Closing Date, all as
reflected on Schedule 1.1(E).
<PAGE>
15
"Management Option Plan" shall mean that Management Option Plan of the
----------------------
Borrower relating to Muzak Management and attached hereto as Exhibit I, as
such plan may be amended, modified or supplemented from time to time in
accordance with the terms thereof and subsection 7.10.
"Managing General Partner" shall mean MLP Acquisition, L.P., a
------------------------
Delaware limited partnership, and the sole managing general partner of the
Borrower.
"MAS" shall have the meaning set forth in subsection 4.15.
---
Material Adverse Effect" shall mean (a) a material adverse effect upon
-----------------------
the business, operations, properties, liabilities, assets, prospects or
condition (financial or otherwise) of the Borrower and its Subsidiaries
taken as a whole (or such other Person as may be specified) or (b) the
legal impairment of the ability of the Borrower or any Credit Party to
perform its material obligations under any Loan Document to which it is a
party.
"MicroSpace" shall mean MicroSpace Communications Corporation, a North
----------
Carolina Corporation.
"MLP Communications Company" shall mean MLP Communications Company, a
--------------------------
general partnership of which MLP Acquisition, L.P. and MLP Administration
Corp. are the general partners.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
------------------
Section 40 01(a)(3) of ERISA maintained or contributed to for employees of
(i) any Credit Party or (ii) any ERISA Affiliate.
"Music Holdings" shall mean Music Holdings Corp., a Delaware
--------------
corporation and the sole general partner of the Managing General Partner.
"Muzak Management" shall mean the full-time members of operating
----------------
management of the Borrower from time to time, and on the Closing Date
"Muzak Management" shall mean the persons listed on Schedule 1.1(D).
"Net Income" shall mean, for any fiscal period, the net income (or net
----------
loss) of the Borrower and its Subsidiaries on a combined basis as
determined in accordance with GAAP, provided, that, in no event shall
-------- ----
Distributable Income Taxes be subtracted from income in the determination
of Net Income hereunder.
"Net Worth" of the Borrower and its Subsidiaries shall mean, at any
---------
time, the total of all assets appearing on a combined balance sheet of such
Persons prepared in accordance with GAAP, minus (i) the total of all
-----
liabilities
<PAGE>
15
appearing on such combined balance sheet at such time, minus (ii)
-----
Distributable Income Taxes relating to the fiscal period being measured at
such time.
"Non-Competition Agreement" shall mean the Non-Competition Agreement
-------------------------
dated as of the Closing Date among the Seller, Field/Muzak, Inc., The Field
Corporation, the Borrower and the other parties thereto, as amended,
supplemented or otherwise modified from time to time.
"Note" shall have the meaning ascribed thereto in the Recitals.
----
"Obligations" shall mean all obligations, liabilities and indebtedness
-----------
of every nature of the Borrower from time to time owed to the Bank under
the Loan Documents including, without limitation, the principal amount of
all debts, claims and indebtedness, accrued and unpaid interest and all
fees, costs and expenses, whether primary, secondary, direct, contingent,
fixed or otherwise, heretofore, now and/or from time to time hereafter
owing, due or payable, provided, however, that "Obligations" shall not
-------- -------
include any amounts due or owing (or otherwise claimed to be due or owing)
to the Bank solely by virtue of and arising from its ownership of or right
to own Partnership Interests.
"Option Agreement" shall mean the Option Agreement, dated as of the
----------------
date hereof, between the Borrower and the Bank, substantially in the form
of Exhibit D, as the same may be amended, supplemented or otherwise
modified from time to time.
"Participant" shall have the meaning ascribed thereto in subsection
-----------
10.6(b).
"Partners" shall mean the General Partners, the Limited Partners, and
--------
the other holders of Partnership Interests from time to time.
"Partnership Agreement" shall mean the Amended and Restated Agreement
---------------------
of Limited Partnership of the Borrower, dated as of September 4, 1992, as
amended, supplemented or otherwise modified from time to time.
"Partnership Interests" shall mean any issued and outstanding
---------------------
interests in the Borrower owned on a given date by the Partners, including,
without limitation, any interest in the Borrower acquired pursuant to the
Management Option Plan.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
----
successor thereof under ERISA.
<PAGE>
17
"Pension Benefit Plan" shall mean any Employee Plan which is an
--------------------
"employee pension benefit plan," as defined in Section 3(2) of ERISA.
"Permitted Encumbrances" shall mean the following types of Liens:
----------------------
(a) Liens for taxes, assessments or other governmental charges
or levies, provided, that payment thereof shall not at the time be
--------
required in accordance with the provisions of subsection 6.2;
(b) statutory Liens of landlords, carriers, warehousemen,
mechanics, vendors, workmens, materialmen and other similar liens
imposed by law that are incurred in the ordinary course of business
for sums in the aggregate not exceeding (i) $500,000 prior to the
fifth anniversary of the Closing Date or (ii) $750,000 thereafter and
not more than thirty (30) days delinquent or that are being contested
in good faith;
(c) Liens incurred or deposits or pledges made in the ordinary
course of business to secure workers' compensation, unemployment and
other insurance and other types of social security obligations,
statutory obligations, surety, stay and appeal bonds, bids, tenders,
leases, government contracts, trade contracts, performance and return-
of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(d) Liens arising out of judgments or awards (other than any
judgment described in Section 9(k)) in respect of which the Borrower
or any of its Subsidiaries shall in good faith be prosecuting an
appeal or proceedings for review and in respect of which it shall have
secured a subsisting stay of execution pending such appeal or
proceedings for review, provided it shall have set aside on its books
adequate reserves, in accordance with GAAP, with respect to such
judgment or award;
(e) zoning restrictions, easements, licenses, rights-of-way,
restrictions, and other similar charges or encumbrances on the use of
real property or other minor irregularities in title thereto, which do
not interfere in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries and do not lessen
in any material respect the value of such property being encumbered;
(f) Liens in favor of the Senior Lenders pursuant to the Senior
Loan Documents;
<PAGE>
18
(g) purchase money mortgages or other purchase money Liens
(including, without limitation, Capital Leases) upon any fixed or
capital assets hereafter acquired, or purchase money mortgages
(including, without limitation, Capital Leases) on any such assets
hereafter acquired or existing at the time of acquisition of such
assets, whether or not assumed, so long as (i) any such Lien does not
extend to or cover any other asset of the Borrower or any of its
Subsidiaries, (ii) such Lien secures the obligation to pay the
purchase price of such asset (or the obligation under such Capital
Leases) and interest thereon only, and (iii) such Lien arises under a
Capital Lease incurred in accordance with subsection 7.1;
(h) Liens existing on the date hereof to the extent set forth on
Schedule 1.1(A) and any renewals thereof, but not any increase in
amount thereof and not any extension thereof to other property;
(i) unperfected Liens arising by operation of law under Article
2 of the UCC in favor of unpaid sellers or prepaying buyers of goods
relating to amounts that are not past due in accordance with their
respective terms of sale; and
(j) other Liens for sums in the aggregate not exceeding
$500,000.
"Permitted Indebtedness" shall have the meaning set forth in
----------------------
subsection 7.3.
"Person" shall mean an individual, a partnership, a corporation, an
------
association, a business trust, a joint stock company, a trust, an
unincorporated organization or other entity, a joint venture, a trade or
business, a government or any agency or political subdivision thereof or
any other entity of whatever nature.
"Prior Indebtedness" shall mean the indebtedness of the Seller, which
------------------
is to be paid on the Closing Date.
"Pro Forma" shall mean the unaudited balance sheet of the Borrower and
---------
its Subsidiaries (with accompanying notes) as of the Closing Date after
giving effect to the Related Transactions. The Pro Forma is annexed hereto
as Schedule 1.1(B).
"Purchase Agreement" shall have the meaning set forth in the preamble
------------------
to this Agreement.
"Purchase Documents" shall mean the Purchase Agreement, the Disclosure
------------------
Schedules, the Bill of Sale, the form of Earn-out Note, the Non-Competition
Agreement, the Torrance
<PAGE>
19
Note and all other documents executed in connection with the Acquisition.
"Purchasing Noteholder" shall have the meaning ascribed thereto in
---------------------
subsection 10.6(c).
"Receivables" shall mean and include all accounts, contract rights,
-----------
instruments, documents, chattel paper and general intangibles, whether
secured or unsecured, now existing or hereafter created, of the Credit
Parties and whether or not specifically sold or assigned to the Agent (as
defined in the Senior Credit Agreement) or the Senior Lenders.
"Reference Projections" shall have the meaning set forth in subsection
---------------------
5.29.
"Register" shall have the meaning ascribed thereto in subsection
--------
10.6(d).
"Related Transaction Documents" shall mean the Purchase Documents, the
-----------------------------
Loan Documents, the Barclays Partnership Documents, the Partnership
Agreement, the Subordinated Indebtedness Documents, the Senior Loan
Documents and any other documents executed in connection therewith.
"Related Transactions" shall mean the Acquisition, the execution and
--------------------
delivery of the Related Transaction Documents, the funding of the Term Loan
and each borrowing of the Revolving Loans on the Closing Date, the funding
of the Loan, the repayment of the Prior Indebtedness and the payment of all
fees, costs and expenses associated with all of the foregoing.
"Release" shall mean any releasing, spilling, leaking, seepage,
-------
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping, as defined by Environmental Law. The
meaning of the term shall also include any Threatened Release, as defined
by Environmental Law.
"Reportable Event" shall have the meaning set forth in Section 4043(b)
----------------
of ERISA, and the regulations thereunder, as to which the PBGC has not by
regulation waived the notice requirement of Section 4043(a) of ERISA.
"Required Consents" shall mean those consents listed on Schedule 8.8
-----------------
to the Purchase Agreement.
"Revolving Loan" shall have the meaning ascribed thereto in the Senior
--------------
Credit Agreement.
"Seller" shall have the meaning set forth in the preamble to this
------
Agreement.
<PAGE>
20
"Senior Credit Agreement" shall mean the (1) Credit Agreement, dated
-----------------------
as of the Closing Date, among the Borrower, the Lenders listed therein and
UBS, as agent for such lenders and the other financial institutions now or
hereafter parties thereto, as originally in effect (the "Original Senior
Credit Agreement"), (2) all modifications, amendments, supplements or
replacements of the Original Credit Agreement ("Amendments"), (3) any
agreement evidencing Indebtedness of the Borrower all or a portion of the
proceeds of which are used to refinance any Indebtedness incurred pursuant
to such Credit Agreement or any previous refinancing thereof, in each case,
as modified, amended, supplemented or replaced from time to time
("Refinancings", and together with the Original Credit Agreement and the
Amendments, the "Amended Credit Agreement"), and (4) any agreement (as
amended, modified or supplemented from time to time, a "New Credit
Agreement") which, following the termination and satisfaction in full of
all agreements referred to in clauses (1), (2) and (3) above, creates
Indebtedness which states that it is "Senior Indebtedness" by reference to
this Agreement (the agreements referred to in clauses (1), (2), (3) and (4)
above, being the "Combined Senior Credit Agreements"), except to the extent
that:
(i) the aggregate amount of Indebtedness incurred and permitted to be
incurred under the Amended Credit Agreement exceeds at any time the
sum of (A) the sum of (i) the original outstanding amount of the term
loan under the Original Credit Agreement on the Closing Date plus (ii)
the maximum amount of the revolving credit loan commitments under the
Original Credit Agreement on the Closing Date less (iii) all scheduled
payments of principal of the term loan actually made by the Borrower
through such time under the Amended Credit Agreement but only to the
extent that any such payment (or portion thereof) would have become
due and payable through such time under Section 3.1(a) of the Original
Credit Agreement plus (B) the amount by which (i) $7,000,000, exceeds
(ii) the amount of all (x) increases in term loan borrowings, over the
amount thereof which was scheduled to be outstanding at such time
under Section 3.1(a) of the Original Credit Agreement, and (y)
revolving commitments over the amount of the revolving loan commitment
under the Original Credit Agreement as in effect on the Closing Date,
in each case, made pursuant to any Amendments or Refinancings through
such time,
(ii) the aggregate amount of revolving credit loans incurred and
permitted to be incurred at any time pursuant to the Amended Credit
Agreement exceeds $13,000,000, or
(iii) the aggregate amount of term loans incurred and permitted to be
incurred at any time under the Amended
<PAGE>
21
Credit Agreement exceeds the sum of (A) the original outstanding
amount of the term loan under the Original Credit Agreement on the
Closing Date less all scheduled payments of principal of the term loan
actually made by the Borrower through such time under the Amended
Credit Agreement but only to the extent that any such payment (or
portion thereof) would have become due and payable through such time
under Section 3.1(a) of the Original Credit Agreement plus (B) the
amount by which (i) $5,000,000 exceeds (ii) all increases in term loan
borrowings, over the amount thereof which was scheduled to be
outstanding at such time under Section 3.1(a) of the Original Credit
Agreement, made pursuant to any Amendments and Refinancings through
such time,
provided, however, that, notwithstanding the foregoing, at any time,
-------- -------
including, without limitation, following the scheduled maturity date under
the Original Credit Agreement, the Combined Senior Credit Agreements shall
constitute the "Senior Credit Agreement" so long as (A) the aggregate
amount of Indebtedness outstanding thereunder at such time does not exceed
$23,000,000, (B) the amount of Indebtedness constituting term loans
outstanding thereunder at such time does not exceed $15,000,000 and (C) the
amount of revolving credit loans outstanding and permitted to be
outstanding thereunder at such time does not exceed $13,000,000; provided,
--------
further, that the Combined Senior Credit Agreements shall
-------
in any event constitute the "Senior Credit Agreement" to the extent that
the Indebtedness and commitments outstanding thereunder do not exceed any
of the limitations set forth above in this definition and the amount of any
excess shall not constitute Senior Indebtedness.
"Senior Debt Holders" shall mean, at any time, the holders of Senior
-------------------
Indebtedness at such time.
"Senior Indebtedness" shall mean (i) the principal of (x) all
-------------------
Indebtedness, now existing or hereafter created, of the Borrower under or
evidenced by the Senior Credit Agreement or the Notes (as defined in the
Senior Credit Agreement) from time to time issued in connection therewith
in aggregate amounts of term loans and revolving credit loans incurred or
to be incurred not exceeding the amounts set forth in the definition of
"Senior Credit Agreement" (including, without limitation, the contingent
obligation of the Borrower in respect of any letters of credit issued
pursuant thereto) and (y) Indebtedness for Borrowed Money of the Borrower
(other than that issued pursuant to the Senior Loan Documents and other
than the Exchange Notes, the Earn-Out Note and Indebtedness permitted
pursuant to Section 10.3(b) or (i) of the Senior Credit Agreement as
originally in effect) and Indebtedness of the Borrower in respect of Hedge
Agreements, in each case to the extent permitted by the terms of the Senior
Credit Agreement as originally in
<PAGE>
22
effect; (ii) all interest with respect to principal described in the
foregoing clause (i) and obligations described in clause (iii) of this
definition (including, without limitation, any interest accruing subsequent
to the commencement of any proceeding against or with respect to the
Borrower under the Bankruptcy Code or any other proceedings in insolvency,
bankruptcy, receivership, reorganization, dissolution, assignment for the
benefit of creditors or other similar case or proceeding whether or not
such interest constitutes an allowed claim in any such proceeding); and
(iii) all other obligations, including all Lender Debt (as defined in the
Senior Credit Agreement), now existing or hereafter arising under the
Senior Credit Agreement, including, without limitation, premiums,
commitment, agency and other fees, expenses (including reasonable
attorney's fees and disbursements payable thereunder or in connection
therewith) and indemnities payable thereunder.
"Senior Lenders" shall mean the parties listed as lenders from time to
--------------
time under the Senior Credit Agreement, or any successor or additional
lender under the Senior Credit Agreement.
"Senior Loan Documents" shall be the collective reference to the
---------------------
Senior Credit Agreement, each Security Document, each Guaranty, the Notes,
each Letter of Credit, each Letter of Credit Agreement, each Borrower's
Certificate, each Borrowing Base Certificate, each landlord's Certificate
and each Hedge Agreement (each, as defined in the Senior Credit Agreement)
and any amendments, replacements, supplements and modifications thereto
from time to time permitted pursuant to the definition of "Senior Credit
Agreement".
"Solvent" and "Solvency" shall mean, with respect to any Person on a
------- --------
particular date, that on such date, (a) the fair saleable value of the
assets of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person, (b)
the present fair salable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature, and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute an unreasonably small
capital.
"Special Subsidiaries" shall mean (a)(i) Melody Washington
--------------------
Partnership, a Washington general partnership, (ii) Melody California
Partnership, a California general partnership, and (iii) Melody New York
Partnership, a New
<PAGE>
23
York general partnership, each of whose partnership interests are wholly-
owned by the Borrower and Melody, Inc. of Delaware, a Delaware corporation,
and (b) Melody, Inc. of Delaware, a Delaware corporation and wholly-owned
Subsidiary
"Specified Transactions" shall mean and include: (1) non-cash payments
----------------------
of distributions on the Class C Partnership Interests; (2) the conversion
of the Class C Partnership Interests into Exchange Notes pursuant to
Section 16.02 of the Partnership Agreement and the accrual of non-cash
interest thereon; (3) the issuance of Earn-Out Notes pursuant to Section
2.5 of the Purchase Agreement and the accrual of non-cash interest thereon;
(4) the issuance and exercise of Class B Partnership Interest options, and
the issuance of Class B Partnership Interests upon the exercise thereof, to
Muzak Management pursuant to the Management Option Plan; (5) the issuance
of the Management Notes; (6) the issuance of Class A-2 Partnership
Interests to the Bank or any Affiliate pursuant to the Option Agreement;
(7) the issuance of up to 300,000 Class A-2 Partnership Interests to a
Senior Lender other than UBS within 30 days following the Closing Date,;
(8) the purchase by the Borrower of Class B Partnership Interests from
former members of Muzak Management (or their permitted transferees) and the
settlement of options held by Muzak Management, in each case for cash (only
if no Default or Event of Default is continuing or would occur as a result
of making such cash payment and subject in all cases to the prior or
simultaneous payment of all amounts due from the applicable employee under
his or her respective Management Notes, which Management Notes shall be
satisfied in full prior to any payment of any cash in respect of the
settlement of options or purchase of Class B Partnership Interests from
such employee) (provided, that to the extent any member of Muzak
-------- ----
Management, within 20 days of the settlement in cash of his or her options,
utilizes such cash to purchase Class B Partnership Interests in the
Borrower, such cash amount need not be applied to such person's Management
Notes) or in "Permitted Securities" (as defined in the Partnership
Agreement) and (9) so long as no Default or Event of Default is continuing,
a loan or loans by the Borrower to the Administrative General Partner of
funds pursuant to Section 11.14(d) of the Partnership Agreement (as in
effect on the Closing Date).
"Subordinated Indebtedness" shall mean all Indebtedness of the
-------------------------
Borrower or any of its Subsidiaries pursuant to the Exchange Notes and the
Earn-Out Note.
"Subordinated Indebtedness Documents" shall mean all documents and
-----------------------------------
agreements executed in connection with Subordinated Indebtedness,
including, without limitation, the Exchange Notes, the Earn-Out Note and
the Subordination Agreements, but excluding the Purchase Documents (other
than
<PAGE>
24
the Earn-out Note and the Exchange Notes) and the Partnership Agreement.
"Subordinated Obligations" shall have the meaning ascribed thereto in
------------------------
subsection 8.1.
"Subordination Agreements" shall mean the Exchange Note Subordination
------------------------
Agreement and the Earn-Out Note Subordination Agreement.
"Subsidiary" of any Person shall mean (a) any corporation of which
----------
more than fifty percent (50%) of the issued and outstanding securities
having ordinary voting power for the election of directors is owned or
controlled, directly or indirectly, by a Person and/or one or more of its
Subsidiaries, and (b) any partnership in which a Person and/or one or more
Subsidiaries of such Person shall have a general partnership interest or
any other interest (whether in the form of voting or participation in
profits or capital contribution), in each case of more than fifty percent
(50%). Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"Supervisory Policy" shall have the meaning set forth in subsection
------------------
7.4(b)(iii).
"Term Loan" shall have the meaning ascribed thereto in the Senior
---------
Credit Agreement.
"Termination Date" shall mean the earlier of (i) the date on which the
----------------
Loan has been paid in full and all obligations of the Borrower in
connection therewith and herewith have been satisfied and (ii) September 4,
2002.
"Third Party" shall mean any person other than the Borrower or any of
-----------
its Subsidiaries.
"Torrance Note" shall mean the subordinated promissory note made by
-------------
the Borrower in favor of Mark Torrance on December 31, 1986, as modified by
those certain note modification agreements dated as of January 21, 1987 and
July 10, 1989, in substantially the form attached hereto as Exhibit K.
"Transfer" shall mean sell, transfer, assign, convey, lease and/or
--------
deliver (other tenses of the term have similar meaning) or sale, transfer,
assignment, conveyance, lease and/or delivery, as indicated by the context.
"Transfer Event" shall mean (i) a Transfer of substantially all of the
--------------
assets of the Borrower, (ii) a change in control of the board of directors
of the general partner of the Managing General Partner pursuant to which
any single Person other than an Affiliate of the Borrower on
<PAGE>
25
the Closing Date acquires control of such board of directors or (iii) the
Transfer to a single entity of at least 51% or more of (x) the voting
equity interests in the Borrower (or any parent of the Borrower or the
Managing General Partner) or (y) the aggregate voting and nonvoting equity
or partnership interests in the Borrower (or any parent of the Borrower or
the Managing General Partner), in each case, whether by sale, merger or
consolidation to any single Person or two or more Persons which are
Affiliates of each other (provided that such two or more Affiliated Persons
--------
would be considered to be acting in concert as a "group" for purposes of
Section 13(d) of the Securities Exchange Act of 1934, for purposes hereof
treating such voting equity interests as if such voting equity interests
were equity securities in respect of which a Schedule 13D would be required
to be filed with the Securities and Exchange Commission as if the requisite
percentage and other threshold conditions to such filing were satisfied)
(other than a pledge of the voting equity interests in the Borrower to the
Senior Lenders); provided, however, that a "Transfer Event" shall not
-------- -------
include (i) a change of control of CCI or Centre Partners or their
successors (unless at the time of such change of control, substantially all
the operating assets of CCI or Centre Partners directly or indirectly,
consist of assets of Buyer; (ii) any Transfer of the voting equity
interests in the Borrower or CCI or the Managing General Partner to each
other and/or to an affiliate or one or more partners of CCI, the Managing
General Partner or Centre Partners, or (iii) a Transfer of substantially
all of the assets of the Borrower in connection with an incorporation of
the Borrower and its business and assets in accordance with the provisions
of the Partnership Agreement and subsection 7.5(h).
"UBS" shall mean Union Bank of Switzerland, New York Branch.
---
"UCC" shall mean the Uniform Commercial Code (or any successor
---
statute) as in effect on the date hereof in the State of New York.
"Wholly-Owned Subsidiary," as applied to any Person, shall mean each
-----------------------
Subsidiary in which such Person or one or more Wholly-Owned Subsidiaries of
such Person owns all of the outstanding capital stock or equity interests.
"Working Capital" shall mean at any time, all accounts, prepaid
---------------
expenses and other Current Assets of the Borrower and its Subsidiaries,
excluding cash, at such time, minus Current Liabilities of the Borrower and
-----
its Subsidiaries at such time.
<PAGE>
26
"Written Notice" and "in writing" shall mean any form of written
-------------- ----------
communication or a communication by means of telex, telecopier device,
telegraph or cable.
1.2 Other Definitional Provisions. (a) Unless otherwise defined
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Note, any other Loan Document, any Barclays Partnership
Document or any certificate, report or other document made or delivered pursuant
hereto or thereto.
(b) As used herein, in the Note, any other Loan Document, any
Barclays Partnership Document and in any certificate, report or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
subsection 1.1, and accounting terms partly defined in subsection 1.1 to the
extent not defined, shall have the respective meanings given to them under GAAP.
To the extent that the definitions of accounting terms herein are inconsistent
with the meanings of such terms under GAAP, the definitions contained herein
shall control.
(c) The words "hereof," "herein," "hereunder" and "hereto" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, as the case may be;
and Section, subsection, Schedule and Exhibit references contained in this
Agreement are references to Sections, subsections, Schedules and Exhibits in or
to this Agreement, unless otherwise specified.
(d) If any changes in accounting principles from those used in the
preparation of the Financial Statements referred to in subsection 5.10(a) are
hereafter occasioned by promulgation of rules, regulations, pronouncements or
opinions by or are otherwise required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions), and any of such changes results in
a change in the method of calculation of, or affects the results of such
calculation of, any of the financial covenants, standards terms found herein,
then the parties hereto agree to enter into and diligently pursue negotiations
in order to amend such financial covenants, standards or terms so as to
equitably reflect such changes, with the desired result that the criteria for
evaluating a Credit Party's financial condition and results of operations shall
be the same after such changes as if such changes had not been made.
SECTION 2. LOAN FACILITY
-------------
2.1 The Loan. Subject to the terms and conditions hereof, the Bank
--------
hereby agrees to make the Loan to the Borrower on the Closing Date in the
principal amount of $7,500,000.
<PAGE>
27
2.2 Procedure for Borrowing. The Borrower shall give irrevocable
-----------------------
written notice to the Bank prior to 10:00 A.M., New York City time, on the
Closing Date of its intention to borrow the amount of the Loan, which notice
shall state that the Bank shall make payment to the Borrower by wire transfer to
a specified account of the Borrower designated in such notice. If the terms and
conditions hereof have been met to the satisfaction of the Bank on the Closing
Date, the Bank shall transmit the amount of $7,500,000, in Dollars, to the
Borrower in the manner specified by the Borrower in such notice.
2.3 The Note. The Note shall be (a) payable to the order of the
--------
Bank, (b) dated the Closing Date and (c) stated to mature in three consecutive
installments as follows:
<TABLE>
<CAPTION>
<S> <C>
September 4, 2001 $2,500,000
March 4, 2002 $2,500,000
September 4, 2002 $2,500,000
</TABLE>
On September 4, 2002, the full principal amount of the Loan then outstanding
shall be due and payable together with all accrued but unpaid interest, fees and
other amounts due and payable hereunder. The Note shall bear interest on the
unpaid principal amount thereof at the applicable interest rate per annum
specified in subsection 3.1. Interest on the Note shall be payable as specified
in subsection 3.1.
SECTION 3. INTEREST RATE PROVISIONS; PAYMENTS;
-----------------------------------
OPTIONAL PREPAYMENTS; FEES; ORIGINAL
------------------------------------
ISSUE DISCOUNT
--------------
3.1 Interest Rates and Payment Dates. (a) The Loan shall bear
--------------------------------
interest on the unpaid principal amount thereof for the period from and
including the Closing Date to but excluding the Termination Date, at a fixed
rate per annum equal to 12.5%, calculated on the basis of a 365-day year for the
actual days elapsed.
(b) If all or a portion of the principal amount of the Loan or any
other amount payable under this Agreement shall not be paid when due (whether at
the stated maturity, by acceleration or otherwise), any such overdue principal
amount or other amount shall bear interest at a rate per annum which is 2% above
the rate otherwise applicable thereto from the date of such non-payment until
paid in full (as well after as before judgment).
(c) Interest shall be payable semi-annually in arrears on each
Interest Payment Date and upon payment in full of the Loan.
<PAGE>
28
3.2 Optional Prepayments. The Borrower shall have the right at any
--------------------
time to prepay the outstanding Loan either in whole or part, provided that, any
--------
such prepayment made prior to the fourth anniversary of the Closing Date shall
be accompanied by a premium equal to the percentage of the principal amount of
the Loan or portion thereof to be prepaid set forth below for the period in
which such prepayment is made:
<TABLE>
<CAPTION>
Period Percentage
------------------------------------- ----------
<S> <C>
September 4, 1992 - September 3, 1993 4%
September 4, 1993 - September 3, 1994 3%
September 4, 1994 - September 3, 1995 2%
September 4, 1995 - September 3, 1996 1%
</TABLE>
Notwithstanding the immediately preceding sentence, no such premium shall be
payable by the Borrower with respect to (a) a prepayment of all of the Loan
occurring in connection with (i) a merger or consolidation of the Borrower with
or into another entity, (ii) a sale by the Borrower of all or substantially all
of its assets or the partnership interests or stock of the Subsidiaries and
(iii) a sale of all or substantially all of the partnership interests or stock
of the Borrower and (b) a prepayment of the Loan in whole or in part (i)
occurring in connection with a public offering by the Borrower of its
partnership interests or stock for net proceeds in an amount not less than the
amount of such prepayment of the Loan and (ii) with the proceeds of internally
generated funds. Any optional prepayment of the Loan shall be made upon at
least 10 Business Days' prior notice to the Bank, be in the aggregate principal
amount of $100,000 or a whole multiple of $100,000 in excess thereof, shall be
applied pro rata to the then remaining installments of the Loan. No prepayment
--- ----
of the Loan shall be made without the written consent of the Senior Lenders
unless such consent is not required pursuant to the Senior Credit Agreement or
all Senior Indebtedness made pursuant to the Senior Loan Documents shall have
been repaid in full or shall be repaid simultaneously with the prepayment of the
Loan and the commitments thereunder shall have terminated.
3.3 Payments. All payments (including prepayments) by the Borrower
--------
to the Bank hereunder, whether on account of the principal of or interest on the
Loan, or any other fees or payments due hereunder, as the case may be, shall be
made, without set-off or counterclaim, to the Bank at the Bank's office
at 75 Wall Street, New York, New York 10265, in Dollars and in immediately
available funds. If any payment hereunder becomes due and payable on a day which
is not a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day, and in the case of any payment of principal on the
Loan, interest thereon shall be payable at the applicable rate during such
extension.
<PAGE>
29
3.4 Facility Fee. The Borrower agrees to pay to the Bank a facility
------------
fee of $187,500, of which $25,000 has been paid and the balance shall be payable
on the Closing Date.
3.5 Use of Proceeds. The Borrower will use the proceeds of the
---------------
issuance of the Note hereunder to finance the Acquisition, pay for certain
covenants not to compete and to pay related costs and expenses.
3.6 Original Issue Discount. For purposes of Section 1273(c)(2) of
-----------------------
the Code, the Borrower and the Bank agree that the issue price of the Note is
equal to 86.9721% of the principal amount of the Note and that the sum of
$977,089 therefore shall be treated as Original Issue Discount for purposes of
Sections 1272 et. seq. of the Code.
SECTION 4. REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Bank to enter into this Agreement and the
Barclays Partnership Documents and to make the Loan hereunder, the Borrower
hereby represents and warrants to the Bank that (assuming that the Acquisition,
if it becomes effective, and the making of the Loan by the Bank, if made, occur
simultaneously on the Closing Date):
4.1 Limited Partnership and Corporate Status.
----------------------------------------
(a) Each of the Borrower and the Managing General Partner is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Borrower's principal place of business is at the
address set forth in subsection 10.2. Each non-corporate Subsidiary of the
Borrower is (or, upon creation pursuant to the terms of subsection 7.12, will
be) a general or limited partnership, duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it was organized, and
with its principal place of business is at the address, set forth on Schedule
4.1 in respect of such Subsidiary. Each of the Borrower, the Managing General
Partner and the non-corporate Subsidiaries has all requisite partnership power
and authority to own and operate its properties, to carry on its business in the
manner and in the places now being conducted and as contemplated to be conducted
after giving effect to the Acquisition and to carry out the Related
Transactions.
(b) All equity interests in the Borrower, each Subsidiary and the
General Partners are owned as set forth on Schedule 4.1 (which shall be updated
from time to time upon the formation of any new Subsidiary and delivered to the
Bank) and all such equity interests are free and clear of all Liens, except
Liens in favor of the Senior Lenders, the Borrower to secure the Management
Notes and restrictions on transfer of Partnership Interests set forth in the
Partnership Agreement.
<PAGE>
30
(c) There are no outstanding options to purchase any partnership
interest of any kind whatsoever in the Borrower, except as set forth in (i) the
Management Option Plan and (ii) the Option Agreement and except for that certain
letter between the Managing General Partner and UBS regarding the transfer of
300,000 units of Class A-2 Partnership Interests to a Senior Lender.
(d) Each of Music Holdings and the Administrative General Partner is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified to do business as a foreign
corporation in each additional jurisdiction where the failure to so qualify
would have a Material Adverse Effect. Each of Music Holdings and the
Administrative General Partner has all requisite corporate power to carry on its
business as conducted prior to the consummation of the Acquisition and to
execute, deliver and perform its obligations on behalf of the Borrower under
each Loan Document and Barclays Partnership Document to which the Borrower is a
party and each other Related Transaction Document.
(e) Except for the Special Subsidiaries and with respect to the
holding of the German Licensee Shares, none of the Credit Parties has any
Subsidiaries other than as set forth in Schedule 4.1 (which shall be updated
from time to time upon the formation of any new Subsidiary of the Borrower and
delivered to the Bank), which Schedule 4.1 correctly sets forth the name of each
such Subsidiary, its jurisdiction of incorporation or formation and a statement
of the outstanding capitalization of each such Subsidiary as of the date of
delivery of such Schedule 4.1. Melody New York Partnership has no assets other
than assets with a fair market value not exceeding $2,000,000. Each corporate
Subsidiary, if any, is (i) a duly organized and validly existing corporation in
good standing under the laws of the state of its incorporation with perpetual
corporate existence, and has the corporate power and authority to own its
properties and to transact the business in which it is engaged or presently
proposes to engage, and (ii) qualified as a foreign corporation and in good
standing in each other jurisdiction in which it owns or leases property of a
nature, or transacts business of a type, that would make such qualification
necessary except where failure to qualify would not have a Material Adverse
Effect.
4.2 Power and Authority. (a) Each of the Credit Parties, the General
-------------------
Partners and each general partner of each Credit Party other than the Borrower
has the corporate or partnership power and authority, as the case may be, to
execute, deliver and perform the terms and provisions of this Agreement, the
other Loan Documents, the Barclays Partnership Documents and the other Related
Transaction Documents, in each case, to which it is a party or, in the case of
the General Partners or the general partner of each Credit Party other than the
Borrower, which it will execute, deliver and perform in its capacity as general
partner of the Borrower, the Managing General Partner or such other Credit
Party, respectively, and all instruments and
<PAGE>
31
documents delivered by it pursuant thereto and hereto and each of the Credit
Parties, the General Partners and the general partner of each Credit Party other
than the Borrower has duly taken or caused to be duly taken all necessary
corporate or partnership action, as the case may be, (including, without
limitation, the obtaining of any consent of stockholders or partners required by
law or its certificate of incorporation or by-laws or partnership agreement or
any other constitutional document), to authorize the execution, delivery and
performance of this Agreement, each other Loan Document, each Barclays
Partnership Document and the other Related Transaction Documents, in each case,
to which it is a party or, in the case of the General Partners or the general
partner of each Credit Party other than the Borrower, or the general partner of
each Credit Party other than the Borrower, which it will execute, deliver and
perform in its capacity as general partner of the Borrower, the Managing General
Partner, or such other Credit Party, respectively, and the instruments and
documents delivered by it pursuant thereto and hereto. Each of this Agreement,
the other Loan Documents, the Barclays Partnership Documents, the other Related
Transaction Documents and each of the other instruments and documents executed
and delivered by any of the Credit Parties, or the General Partners or the
general partner of each Credit Party other than the Borrower pursuant hereto and
thereto to which it is a party or in its capacity as general partner constitute
a legal, valid and binding obligation of such Person, and is enforceable in
accordance with its terms.
(b) The Borrower has delivered to the Bank a complete and correct
copy of the Subordinated Indebtedness Documents and the Senior Loan Documents
and each of the representations and warranties given by the Borrower therein is
true and correct in all material respects. The subordination provisions of the
Subordinated Indebtedness Documents will be enforceable against the holders of
such Subordinated Indebtedness by the holder of the Note which has not
effectively waived the benefits thereof. All Obligations, including the
obligations to pay principal of and interest on the Loan, constitute senior
Indebtedness entitled to the benefits of subordination created by the
Subordinated Indebtedness Documents. The principal of and interest on the Note
and all other Obligations will constitute "senior debt" as that or any similar
term is or may be used in any other instrument evidencing or applicable to any
other Subordinated Indebtedness of the Borrower. The Borrower acknowledges that
the Bank is entering into this Agreement and is making the Loan in reliance upon
the subordination provisions of the Subordinated Indebtedness Documents and this
subsection 4.2.
4.3 No Violation of Agreements. (a) Except for the agreements listed
--------------------------
on Schedule 4.3, none of the Credit Parties is in default under any Contractual
Obligation (other than any Lease) to which any of them is a party or by which
any of them may be bound except where such default would not have a Material
Adverse Effect.
<PAGE>
32
(b) Neither the execution and delivery of this Agreement, the other
Loan Documents, the Barclays Partnership Documents, the other Related
Transaction Documents or any of the instruments and documents to be delivered
pursuant hereto or thereto, nor the consummation of the transactions herein and
therein contemplated, nor compliance with the provisions hereof or thereof, nor
the execution, delivery and performance by the General Partners or by any other
general partner of any Credit Party, in each case in its capacity as general
partner, of this Agreement, the other Loan Documents, the Barclays Partnership
Documents or the other Related Transaction Documents or any of such instruments
or documents, nor compliance with the provisions hereof or thereof, will violate
any provision of the certificate of incorporation or by-laws or partnership
agreement, as the case may be, of any of the Borrower or any of its Subsidiaries
or any of the General Partners or of any other general partner of any Credit
Party or any law or regulation, or any order or decree of any court or
governmental instrumentality, or, except as described on Schedule 4.3, will (i)
conflict with, or result in the breach of, or constitute a default under, any
Contractual Obligation to which the Borrower or any of its Subsidiaries, any of
the General Partners or any other general partner of any Credit Party is a party
or by which any of them or their respective properties may be bound or, (ii)
except as permitted by subsection 7.2, result in the creation or imposition of
any Lien upon any property of the Borrower or any of its Subsidiaries.
4.4 No Litigation. (a) Except as disclosed on Schedule 4.4, there
-------------
are no actions, suits, or proceedings pending or, to the best knowledge of the
Borrower, threatened against the General Partners, any of the Credit Parties or
any of their respective Subsidiaries, before any court, arbitrator or
Governmental Body which challenge the validity or propriety of the transactions
contemplated under this Agreement, the other Loan Documents, the Barclays
Partnership Documents, the Related Transaction Documents or the documents,
instruments and agreements executed or delivered in connection herewith,
therewith or related thereto, or which, if adversely determined, would result in
any Material Adverse Effect.
(b) None of the General Partners or Credit Parties is in default in
any material respect under any applicable statute, rule, order, decree or
regulation of any court, arbitrator or Governmental Body having jurisdiction
over such General Partner or Credit Party.
(c) No judgment, order, injunction or other similar restraint with
respect to any General Partner, Credit Party or Subsidiary exists which
prohibits the Acquisition, the financing thereof, or any of the other
transactions contemplated hereby or in connection therewith or herewith.
4.5 Title to Properties, Liens. (a) To the best knowledge of the
--------------------------
Borrower, except as described on Schedule 4.5,
<PAGE>
33
each Credit Party and each of their respective Subsidiaries owns and has good
and marketable title, subject to Permitted Encumbrances, to all its respective
properties and assets reflected on its balance sheet and valid leasehold
interests in the property it leases. Except for Permitted Encumbrances, all such
properties and assets are free and clear of Liens.
(b) To the best knowledge of the Borrower, except as listed on
Schedule 4.5, each Lease described on Schedule 4.5 is in full force and effect,
is valid and binding and is enforceable in accordance with its terms. To the
best knowledge of the Borrower, except as described on Schedule 4.5, there
exists no default by any Credit Party or by any other Person, under any
provision of any Lease that would have a Material Adverse Effect. All real
property owned by or leased to any Credit Party or any Subsidiary thereof is
described on Schedule 4.5.
4.6 Financial Statements and Condition.
----------------------------------
(a) Except as disclosed on Schedule 4.6(A), the audited financial
statements of the Seller as at and for the period ended December 31, 1991,
including the related schedules and notes, certified by Arthur Andersen & Co.
present fairly in accordance with GAAP (i) the financial position of the Seller
as of the date of such balance sheet and (ii) the results of operations of the
Seller for such period. Except as disclosed on Schedule 4.6(A), to the best of
the Borrower's knowledge, (x) the Seller had no material direct or indirect
contingent liabilities as of such date which are not reserved for in such
balance sheet or which in accordance with GAAP would have to be included in
footnotes to such balance sheet except to the extent of those disclosed in the
foregoing audited financial statements of the Seller as of and for the period
ended December 31, 1991 and (y) all such financial statements have been prepared
in accordance with GAAP applied on a basis consistently maintained throughout
the period involved.
(b) Except as disclosed on Schedule 4.6(A), to the best of the
Borrower's knowledge, the unaudited financial statements of the Seller as at and
for the period ended June 30, 1992, including the related schedules and notes,
present fairly in accordance with GAAP (i) the financial position of the Seller
as of the date of such balance sheet and (ii) the results of operations of the
Seller for the period then ended, and, except as set forth on Schedule 4.6(A),
since December 31, 1991, no event or change in the business or operations of the
Seller has occurred that could have a Material Adverse Effect.
(c) Except as disclosed on Schedule 4.6(B), the Borrower had no
liabilities, contingent or otherwise, immediately prior to the Acquisition,
except arising from or relating to the transactions contemplated under the
Purchase Agreement or in respect of the financing thereof. The Bank has been
furnished the Pro Forma. Upon giving effect to the Acquisition, none of the
Credit Parties will have any material liabilities, contingent
<PAGE>
34
or otherwise, which are not referred to in such Pro Forma sheet or in the notes
thereto and which are required to be disclosed therein in accordance with GAAP.
(d) The Bank has been furnished projections of the future performance
of the Borrower and its Subsidiaries. The projections and pro forma financial
--- -----
information contained in such materials are based upon good faith estimates and
assumptions believed by the Borrower to be reasonable at the time made, it being
recognized by the Bank that such projections as to future events are not to be
viewed as facts and that actual results during the period or periods covered by
such projections may differ from the projected results.
(e) Except as disclosed on Schedule 4.6(A), no fact is known to any
Credit Party which would have a Material Adverse Effect that has not been set
forth in the financial statements referred to in paragraphs (a), (b) or (c) of
this subsection 4.6 or disclosed herein or in the Disclosure Schedules or
otherwise disclosed to the Bank in writing prior to the Closing Date.
4.7 Intellectual Property. Except as listed on Schedule 4.7, each of
---------------------
the Borrower and the Credit Parties possesses all the Intellectual Property and
all other trademarks, trade names, copyrights, patents, licenses or rights in
any thereof (including, without limitation, those listed on Schedule 4.7) which
are adequate for the conduct of its business.
4.8 Payment of Taxes. Except to the extent permitted pursuant to
----------------
subsection 6.2, all material tax returns and reports of each of the Credit
Parties and their respective Subsidiaries required to be filed by any of them
have been timely filed, and all taxes, assessments, fees and other governmental
charges upon any of them and upon their respective properties, assets, income
and franchises that are shown on such returns as due and payable have been paid
when due and payable.
4.9 Governmental Action. No action of, or filing with, any
-------------------
governmental or public body or authority (other than normal reporting
requirements or filing as to Collateral under the provisions of the Senior
Credit Agreement) is required to authorize, or is otherwise required in
connection with, the execution, delivery or performance of this Agreement, the
Guaranties, the Note, the other Loan Documents, the Barclays Partnership
Documents, the other Related Transaction Documents or any of the instruments or
documents to be delivered pursuant hereto or thereto, except for such actions or
filings as have been made or will be made as contemplated by such agreements.
4.10 Disclosure. Neither the Schedules hereto, nor the financial
----------
statements referred to in subsection 4.6(a), (b) or (c), nor the certificates,
statements, reports or other documents furnished to the Bank by or on behalf of
any of Music Holdings, the General Partners or the Credit Parties in connection
herewith or in connection with any transaction contemplated hereby, nor
<PAGE>
35
this Agreement, any other Loan Document, any Barclays Partnership Document, any
Senior Loan Document or any other Related Transaction Document, contains, at the
time furnished, any untrue statement of a material fact or omits to state any
material fact (in each case known to any such Person in the case of any document
not prepared by it) necessary in order to make the statements contained herein
or therein not misleading in light of the circumstances in which the same were
made.
4.11 Regulation U. None of the Credit Parties or any of their
------------
respective Subsidiaries owns any "margin stock" as such term is defined in
Regulation U, as amended (12 C.F.R. Part 221), of the Board. The proceeds of
the borrowings made hereunder will be used only for the purposes set forth in
subsection 3.5. None of the proceeds will be used, directly or indirectly, for
the purpose of purchasing or carrying any margin stock or for the purpose of
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry margin stock or for any other purpose which might constitute the Loan
under this Agreement a "purpose credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 224) of the Board. None of the Credit Parties or
any of their respective Subsidiaries or any agent acting in its behalf has taken
or will take any action which is reasonably likely to cause this Agreement or
any of the documents or instruments delivered pursuant hereto to violate any
regulation of the Board or to violate the Securities Exchange Act of 1934 or any
applicable state securities laws.
4.12 Investment Company. None of the Credit Parties or any of their
------------------
respective Subsidiaries is an "investment company," or an "affiliated person"
of, or "promoter" or "principal underwriter" for, an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended (15
U.S.C. (S)(S) 80a-1, et seq.). None of the transactions contemplated by this
-------
Agreement, the other Loan Documents, the Barclays Partnership Documents, or the
other Related Transaction Documents shall violate such Act.
4.13 Employee Benefit Plans. (a) None of the Credit Parties maintains
----------------------
or contributes to any Employee Plan, other than those listed on Schedule 4.13.
No ERISA Affiliate maintains or contributes to an Employee Plan which is a
"defined benefit plan" (within the meaning of Section 414(j) of the Code), other
than those listed on Schedule 4.13. No prohibited transaction (within the
meaning of Section 406 of ERISA and Code Section 4975) has occurred with respect
to any Employee Plan which would subject the Borrower or any Credit Party to a
material civil penalty under Section 502(i) of ERISA or material tax under
Section 4975 of the Code.
(b) All of the Employee Plans which are maintained by the Credit
Parties or any ERISA Affiliate comply (or will comply by the time required under
Section 401(b) of the Code) currently both as to form and operation, in all
material respects, with
<PAGE>
36
their terms and with the provisions of ERISA and the Code, and all other
applicable laws, rules and regulations. Each such Employee Plan which is
intended to be qualified under Code Section 401(a), has received a favorable
determination letter from the IRS with respect to its initial and/or continuing
qualification, and the trusts created thereunder have been determined to be
exempt from tax under the provisions of Code Section 501. Nothing has occurred
which has affected or is likely to adversely affect such qualification.
(c) Assuming for purposes of this representation that CCI is not an
ERISA Affiliate of the Borrower, the amount for which any Credit Party or any
ERISA Affiliate of the Borrower would be liable pursuant to the provisions of
Sections 4062, 4063 or 4064 or ERISA would be zero if each Pension Benefit Plan
is terminated.
(d) As of the Closing Date, and during the preceding five years,
neither any Credit Party nor any ERISA Affiliate is now, or has been during the
preceding five years, a contributing employer to a "Multiemployer Plan" other
than those listed on Schedule 4.13. As of the Closing Date, neither any Credit
Party nor any of their respective ERISA Affiliates has (i) withdrawn as a
substantial employer so as to become liable for withdrawal liability under the
provisions of Section 4063 of ERISA, (ii) ceased making contributions to any
Pension Benefit Plan subject to the provisions of Section 4064(a) of ERISA to
which any Credit Party or any ERISA Affiliate made contributions during any of
the five years prior to the Closing Date, but only to the extent that the PBGC
determines that there is liability with respect to such withdrawal and such
liability is material, (iii) with respect to the Credit Parties incurred or
caused to occur a "complete withdrawal" (within the meaning of Section 4203 of
ERISA) or a "partial withdrawal" (within the meaning of Section 4205 of ERISA)
from a Multiemployer Plan so as to incur material withdrawal liability under
Section 4201 of ERISA (after giving effect to any subsequent reduction or waiver
of such liability under Sections 4207 or 4208 or ERISA), or (iv) except as set
forth in Schedule 4.13, been a party to any transaction or agreement under which
the provisions of Section 4204 of ERISA were applicable. As of the Closing Date
and during the preceding five years, no Pension Benefit Plan has incurred an
ERISA Event, nor has any material accumulated funding deficiency (as defined in
Section 412(a) of the Code) been incurred, nor has any funding waiver from the
Internal Revenue Service been received or requested with respect to any Pension
Benefit Plan.
(e) As of the Closing Date and during the preceding five years, no
notice of intent to terminate a Pension Benefit Plan under the termination
provisions of Section 4041(c) of ERISA has been filed by any of the Credit
Parties of any ERISA Affiliate.
(f) As of the Closing Date and during the preceding five years, the
PBGC has not instituted proceedings to terminate
<PAGE>
37
(or appoint a trustee to administer) a Pension Benefit Plan maintained for
employees of any of the Credit Parties or any ERISA Affiliate and, to the
knowledge of the Borrower, no event has occurred or condition exists which might
constitute grounds under the provisions of Section 4042 of ERISA for the
termination of (or any appointment of a trustee to administer) any such Pension
Benefit Plan.
(g) The assets of each Pension Benefit Plan maintained by the Credit
Parties are at least equal to the present value of the "benefit liabilities"
(within the meaning of Section 4001(a)(16) of ERISA) under such Pension Benefit
Plan, in each case as of the latest actuarial valuation date for such Pension
Benefit Plan (determined in accordance with the same actuarial assumptions and
methods as those used by such Pension Benefit Plan's actuary in its valuation of
such Plan as of such valuation date).
(h) There are no actions, suits or claims pending (other than routine
claims for benefits) that, to the knowledge of any Credit Party, could
reasonably be expected to be asserted against any Employee Plan maintained by a
Credit Party or against the assets of any such Employee Plan maintained by a
Credit Party. Other than routine claims for benefits, no civil or criminal
action brought pursuant to the provisions of ERISA is pending or, to the best
knowledge of the Borrower, threatened against any fiduciary or any Employee Plan
which is maintained by any Credit Party.
4.14 Acquisition. The Acquisition has been duly and validly
-----------
consummated, without modification, amendment or waiver (except as approved in
writing by the Bank), in accordance with the terms, conditions and provisions of
the Purchase Agreement and the other Purchase Documents and in conformity with
all applicable laws and regulations of the United States, each state thereof and
each subdivision of any such state, except where non-conformity therewith would
not have a Material Adverse Effect.
4.15 FCC Compliance. (a) The Borrower (and, as the case may be, its
--------------
FCC Affiliates) have obtained all necessary Governmental Permits to own and
operate all Multiple Address System ("MAS") microwave radio stations and all
---
other stations licensed by the FCC to MLP Communications Company or to any of
its FCC Affiliates that the Borrower owns and operates from time to time, and
all such Governmental Permits necessary or advisable to operate the business of
the Seller are in full force and Permits would not have a Material Adverse
Effect) and listed on Schedule 4.15.
(b) All of the MLP Communications Company's MAS microwave radio
stations and all other stations licensed by the FCC to MLP Communications
Company or to any of its FCC Affiliates are operated in compliance in all
material respects with all
<PAGE>
38
terms and conditions of their respective Governmental Permits and all applicable
Governmental Rules, except to the extent any such non-compliance would not have
a Material Adverse Effect. All other personal property of the Borrower and its
FCC Affiliates that transmits or receives radio frequency energy or waves is
operated by the Borrower (or, as the case may be, by its FCC Affiliates) in
compliance in all material respects with all applicable Governmental Rules
including, without limitation, the Communications Act and the FCC Rules.
(e) The Borrower has no knowledge of any reason for the FCC to revoke
or to fail to renew any of MicroSpace's FCC Licenses in the ordinary course and
without any condition that could adversely affect MicroSpace or the continued
ability of MicroSpace to provide Channel Capacity to the Borrower or otherwise
have a Material Adverse Effect.
(d) The Channel Capacity Providers are licensed by the FCC to own and
operate the radio broadcast and other stations, which they operate and by means
of which they provide Channel Capacity to Borrower and/or to its FCC Affiliates,
in the communities in which they are broadcasting or transmitting radio
frequency energy or waves and are operating their stations in conformity in all
material respects with the Communications Act and the FCC Rules (except to the
extent such non-conformity would not have a Material Adverse Effect).
(e) To the knowledge of the Borrower, neither MicroSpace nor any
other Channel Capacity Provider material to the operations of the Seller is a
subject of any investigation, notice of violation, order or complaint issued by
or before any Governmental Body, including the FCC, or of any other proceedings
which could threaten or adversely affect the validity or the continued
effectiveness of (i) any of the licenses and authorizations issued by the FCC
and held by any of the Channel Capacity Providers; or (ii) the leases of
MicroSpace for satellite transponder capacity.
(f) The failure of any of the representations set forth in paragraphs
(a) through (e) of this subsection 4.15 to be true and correct could not
reasonably be expected to have a Material Adverse Effect.
4.16 Permits, Etc. (a) Except as listed on Schedule 4.16, to the best
------------
knowledge of the Borrower, each Credit Party and each Subsidiary thereof
possesses all material permits, licenses, approvals and consents of Federal,
state and local governments and regulatory authorities as required to conduct
properly its business substantially as presently conducted and proposed to be
conducted.
(b) Except as listed on Schedule 4.16, to the best knowledge of the
Borrower, each such material permit, license, approval and consent is and will
be in full force and effect, and no event has or shall have occurred which
permits (or with the
<PAGE>
39
passage of time would permit) the revocation or termination of any such permit,
license, approval or consent or the imposition of any restriction thereon of
such nature as may materially limit the operation of the business covered
thereby.
(c) Except as listed on Schedule 4.16, to the best knowledge of the
Borrower, all material approvals, applications, filings, registrations, consents
or other actions required of any local, state or Federal authority to enable
each Credit Party and the Subsidiaries thereof to exploit any such material
permit, license, approval or consent has been obtained or made.
(d) Except as listed on Schedule 4.16, no Credit Party nor any
Subsidiary of any Credit Party (i) is in violation of any duty or obligation
required by law or any rule or regulation applicable to the operation of any of
its businesses, which violation could reasonably be expected to have a Material
Adverse Effect, or (ii) has received any notice from the granting body or any
other governmental authority with respect to any material breach of any covenant
under, or any material default with respect to, any such permit, license,
approval or consent.
(e) Except as listed on Schedule 4.16, before and upon giving effect
to this Agreement, the Notes, the other Loan Documents and the Barclays
Partnership Documents, no material default shall have occurred and be continuing
under any such permit, license, approval or consent.
(f) Except as listed on Schedule 4.16, all consents and approvals of,
filings and registrations with, and all other actions in respect of, all
governmental agencies, authorities or instrumentalities required to maintain any
such material permit, license, approval or consent in full force and effect
prior to the scheduled date of expiration thereof has been, or, prior to the
time when required, will have been, obtained, filed or taken and are or will be
in full force and effect.
(g) Except as listed on Schedule 4.16, to the best knowledge of any
Credit Party or Subsidiary thereof, there is not pending, threatened, any action
to revoke, cancel, suspend, modify or refuse to renew any material permit,
license, approval or consent and each business covered by each such permit,
license, approval or consent is being operated in all material respects in
compliance with such permit, license, approval or consent.
(h) To the best knowledge of the Borrower, there is not now issued or
outstanding or, to the best knowledge of any Credit Party or Subsidiary thereof,
threatened any notice of any hearing, violation or complaint against such Credit
Party or Subsidiary thereof with respect to any such material permit, license,
approval or consent and no Credit Party or Subsidiary thereof has any knowledge
that any Person intends to contest the renewal of any such permit, license,
approval or consent.
<PAGE>
40
4.17 Environmental Status. (a) To the best knowledge of the Borrower,
--------------------
except as disclosed on Schedule 4.17, none of the Credit Parties or any of their
respective Subsidiaries is in material violation of any applicable Environmental
Law, nor are any of the Credit Parties or any of their respective Subsidiaries
under investigation or under review by any Governmental Body with respect to
compliance therewith or with respect to the generation, use, treatment, storage
or Release of any Hazardous Material.
(b) To the best knowledge of the Borrower, except as disclosed on
Schedule 4.17, none of the Credit Parties nor any of their respective
Subsidiaries has any material liability or contingent or potential material
liability in connection with the past generation, use, treatment, storage, or
Release of any Hazardous Material.
(c) To the best knowledge of the Borrower, except as disclosed on
Schedule 4.17 hereto, there has heretofore been no Release of any such Hazardous
Material on, under or about any property owned, leased or operated by any Credit
Party or any Subsidiary that may pose any material risk to safety, health, or
the environment, or that is defined or regulated as a hazardous, toxic or
dangerous waste or other substance under any Environmental Law.
4.18 Solvency. The Borrower is Solvent.
--------
4.19 Representations and Warranties in Other Documents. All
-------------------------------------------------
representations and warranties of Borrower, if any, contained in the
Subordinated Indebtedness Documents, and all representations and warranties of
the Borrower and, to the best knowledge of the Borrower, of the Seller contained
in each Purchase Document, are true and correct in all material respects on and
as of the Closing Date as though made on and as of such date.
4.20 Certain Fees. Except as set forth in Schedule 4.20, no broker's
------------
or finder's fee or commission will be payable with respect to the consummation
of any of the transactions contemplated hereby.
SECTION 5. CONDITIONS PRECEDENT
--------------------
The agreement of the Bank to make the Loan on the Closing Date is
subject to the satisfaction of, or waiver by the Bank of, the following
conditions precedent prior to the Closing Date or concurrently with the closing
of the transactions hereunder:
5.1 Consummation of Acquisition and Related Transactions. The
----------------------------------------------------
Borrower shall have acquired, after giving effect to the transactions
contemplated by the Purchase Agreement, all of the Assets pursuant to and
strictly in
<PAGE>
41
accordance with the terms of the Purchase Agreement, which Assets shall be owned
by the Borrower free and clear of any and all Liens (including, without
limitation, the Liens held by The First National Bank of Chicago, but other than
Permitted Encumbrances) and on the terms and conditions set forth in the
Purchase Agreement, such acquisitions to occur without waiver, amendment or
modification of any of the provisions thereof, except such waiver, amendment or
modification as may have been approved by the Bank. The terms and conditions of
the Acquisition and the Purchase Documents shall be in form, scope and substance
reasonably satisfactory to the Bank. A copy of all deliveries required under
Section 3.2 of the Purchase Agreement shall have been delivered and all other
conditions precedent under Article III of the Purchase Agreement shall have
occurred, each without waiver, amendment or modification of any of the
provisions thereof, except such waiver, amendment or modification as may have
been approved by the Bank. All necessary consents and approvals of all Persons
to the Acquisition and the consummation of the transactions contemplated in
connection therewith (without waiver, amendment or modification thereto, except
such waiver, amendment or modification as may have been approved by the Bank)
shall have been obtained, in form and substance satisfactory to the Bank. Each
of the Related Transaction Documents shall be in form and substance reasonably
satisfactory to the Bank.
5.2 Execution of Agreement. The Bank shall have received one or more
----------------------
counterparts of this Agreement, executed by a duly authorized officer of each
party hereto.
5.3 Other Documents. The Bank shall have received
---------------
(i) the Note, in the form of Exhibit A, duly executed and
delivered by a duly authorized officer of the Borrower; and
(ii) the Option Agreement, in the form of Exhibit D, duly executed
and delivered by the parties thereto.
5.4 Opinions of Counsel. The Bank shall have received (i) an
-------------------
opinion, dated the Closing Date, of Rosenman & Colin, special New York counsel
to the Borrower, in substantially the form of Exhibit B-1, (ii) an opinion,
dated the Closing Date of Special Delaware Counsel to the Borrower, in
substantially the form of Exhibit B-2, (iii) an opinion, dated the Closing Date
of counsel to the Seller, in substantially the form of Exhibit B-3 and (iv)
copies of such other opinions from such other counsel which the Bank may
reasonably request.
5.5 Corporate Structure. The Bank shall be satisfied in all respects
-------------------
with the legal structure and capitalization of each of the Credit Parties and of
each General Partner and all documentation relating thereto, including, without
limitation, the terms and conditions of the Partnership Agreement and the terms
and conditions of each other charter or partnership agreement, by-laws and each
class of capital stock of each Credit
<PAGE>
42
Party, the General Partners, MLP Communications Company and Music Holdings.
5.6 Qualification. Each Credit Party shall be duly qualified and in
-------------
good standing in each jurisdiction in which it owns or leases property or in
which the conduct of its business requires it to so qualify, except where the
failure to so qualify would not have a Material Adverse Effect.
5.7 Proceedings; Receipt of Documents. All requisite corporate
---------------------------------
and/or partnership action and proceedings in connection with the borrowings, the
execution and delivery of the Loan Documents and the Barclays Partnership
Documents and the issuance of the Note shall be satisfactory in form and
substance to the Bank and the Bank shall have received, on or before Closing
Date, all information and copies of all documents, including, without
limitation, records of requisite corporate and/or partnership action and
proceedings, which the Bank may have requested in connection therewith, such
documents where requested by the Bank to be certified by appropriate corporate
Persons or Governmental Bodies. Without limiting the generality of the
foregoing, the Bank shall have received on or before the Closing Date the
following, each dated such day (unless otherwise specified), in form and
substance satisfactory to the Bank (unless otherwise specified):
(a) a copy of the Partnership Agreement and all documents filed with
the Secretary of State of the State of Delaware, and all amendments
thereto, certified, if applicable (as of a date reasonably near the Closing
Date), by the Secretary of State of the State of Delaware as being a true
and correct copy thereof;
(b) a copy of the partnership documents, including the partnership
agreement, of each General Partner which is a Partnership, each Subsidiary
and MLP Communications Company, and a copy of the certificate of
incorporation of Music Holdings, MLP Administration Corp. and Melody, Inc.
of Delaware, and all amendments thereto, in each applicable case certified
(as of a date reasonably near the Closing Date), by the Secretary of State
of the State of Delaware;
(c) certified copies of all consents or other partnership action of
the Borrower approving the Acquisition, this Agreement, the Note, each
other Loan Document, each Barclays Partnership Document and each Purchase
Document to which it is a party, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect
to the Acquisition, this Agreement, the Note, each other Loan Document,
each Barclays Partnership Document and each Purchase Document;
<PAGE>
43
(d) certified copies of all consents or other partnership action and
the resolutions of the Board of Directors of the General Partners and Music
Holdings, as applicable, approving all transactions contemplated hereby and
the General Partners' obligations under the Partnership Agreement;
(e) a copy of a certificate of the Secretary of State of each State
listed on Schedule 4.1, dated a date reasonably near the Closing Date,
stating that the Borrower, each Credit Party, each Subsidiary and each
General Partner which is a corporation or partnership, as the case may be,
is duly qualified and in good standing as a foreign entity in such State;
(f) a certificate of each Credit Party, each General Partner which is
a partnership, MLP Administration Corp. and Music Holdings signed on behalf
of such Person by its general partner, president or vice president,
certifying as to (A) the absence of any amendments to the charter of such
Person since the date of the Secretary of State's certificate for such
Person referred to above, (B) a true and correct copy of the partnership
agreement or by-laws of such Person, as applicable as in effect on the
Closing Date;
(g) a certificate of a general partner or the Secretary or an
Assistant Secretary of each Credit Party, each General Partner which is a
partnership, MLP Administration Corp. and Music Holdings, as applicable,
certifying the names and true signatures of the officers of such Person
authorized to sign, on behalf of such Person, this Agreement, the Note,
each other Loan Document and each Barclays Partnership Document, to which
such Person is a party or by which it is bound;
(h) copies of the Senior Loan Documents, the Purchase Documents, and
Subordinated Indebtedness Documents, which shall be satisfactory in form,
scope and substance to the Bank, which shall be certified by the Borrower's
Chief Executive Officer to be true and complete in all respects and to have
been duly executed and delivered by the Borrower; and
(i) a copy of all documents delivered to the Borrower pursuant to
Article VI of the Purchase Agreement.
5.8 No Litigation. No litigation, proceeding, action, charge, claim,
-------------
demand, suit, petition, governmental investigation or inquiry before or by any
arbitrator or governmental authority shall be continuing or, to the knowledge of
the Borrower or the Bank, threatened, (i) in connection with this Agreement, the
other Loan Documents, the Barclays Partnership Documents, the
<PAGE>
44
Senior Loan Documents or the other Related Transaction Documents which, in the
reasonable business judgment of the Bank, would reasonably be expected to have a
Material Adverse Effect or a material adverse effect on the ability of Centre
Partners and CCI to finance the Acquisition or (ii) involving the Borrower,
either General Partner, Music Holdings, the Seller, Centre Partners, CCI or any
other Centre Partners Entity or the Bank (relating to this transaction), in each
case which, if adversely determined, would, in the reasonable business judgment
of the Bank, have a Material Adverse Effect or a material adverse effect on the
ability of Centre Partners and CCI to finance the Acquisition and there shall
have occurred no development in any such action, charge, claim, demand, suit,
proceeding, petition, governmental investigation, arbitration, litigation or
inquiry that, in the reasonable business judgment of the Bank, would have a
Material Adverse Effect or a material adverse effect on the ability of Centre
Partners and CCI to finance the Acquisition. No judgment, injunction or other
restraining order shall have been issued and remain in effect and no hearing to
cause a judgment, injunction or other restraining order shall have been issued
and remain in effect and no hearing to cause a judgment, injunction or other
restraining order to be issued shall be pending or noticed with respect to any
action, suit or proceeding seeking to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a result of the
documents referred to above or any of the transactions contemplated thereby. The
Borrower shall not be in default under any demand, award, judgment, order,
decree, consent, material conciliation agreement or material settlement
agreement.
5.9 Financial Condition and Solvency Certificate. The Bank shall
--------------------------------------------
have received an opinion executed by the chief financial officer of Borrower, in
form, scope and substance reasonably satisfactory to the Bank, attesting to the
Solvency of the Borrower immediately prior to and after giving effect to the
consummation of the Related Transactions. The Pro Forma shall indicate that
after giving effect to the Acquisition, the Borrower shall have a positive net
worth (excluding goodwill) based on the appraised value of the assets, all in a
manner reasonably satisfactory to the Bank.
5.10 Financial Statements of the Seller. (a) The Bank shall have
----------------------------------
received (i) the annual financial statements for the Seller for the fiscal years
ended on December 31, 1988, December 31, 1989, December 31, 1990 and December
31, 1991 (which financial statements shall in each case be certified by the
independent auditors of the Seller as presenting fairly the financial position
and operations of the Seller as at and for each such period and as having been
prepared in accordance with GAAP) and (ii) unaudited statements of income and
cash flow and balance sheet of the Seller as at June 30, 1992 (collectively, the
"Financial Statements"), certified in the case of all such Financial Statements
--------------------
by the chief financial officer of the Borrower to the effect that such financial
statements (x) are the true and correct copies thereof prepared in accordance
with GAAP
<PAGE>
45
and (y) fairly present the financial position and income of the Seller
as at and for the periods indicated, subject, in the case of unaudited financial
statements, to normal recurring year-end audit adjustments, in each case
satisfactory to the Bank.
(b) In the reasonable judgment of the Bank (i) no material adverse
change shall have occurred in the business, operations, liabilities, assets,
properties, prospects or condition, financial or otherwise, of the Seller as
reflected in the Financial Statements of the Seller as at and for the period
ended December 31, 1991 and (ii) the Bank shall not have become aware of any
previously undisclosed materially adverse information with respect to the
Borrower, except as disclosed to the Bank on or before July 31, 1992.
5.11 Facility Fees and Expenses. The Bank shall have received from
--------------------------
the Borrower in immediately available funds the facility fee to be paid on the
Closing Date pursuant to subsection 3.4 and all fees and expenses of the Bank
(including the accrued fees and disbursements of counsel to the Bank) payable by
the Borrower pursuant to subsection 10.5(a) which have accrued prior to the
Closing Date.
5.12 Insurance. The Bank shall have received evidence, in form,
---------
scope and substance and with insurance carriers reasonably satisfactory to the
Bank, of all policies of insurance required pursuant to subsection 6.3, in form
and substance satisfactory to the Bank. The Bank shall have received a copy of a
letter, satisfactory to it in form, scope and substance, from an insurance
broker acceptable to the Bank confirming that the amount of insurance obtained
under such policies, and the terms and conditions thereof, are reasonable and
appropriate in the context of the business of the Borrower.
5.13 Compliance with Law and Related Documents. (a) The Acquisition
-----------------------------------------
and the transactions contemplated under this Agreement and the Related
Transaction Documents shall (i) be in compliance with the certificate of limited
partnership of the Borrower, (ii) be in compliance in all respect with all
applicable laws and regulations of the United States, each state thereof and
each subdivision of any such state, including, without limitation, the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, except, in each
case, where non-compliance would not have a Material Adverse Effect as to the
Borrower, and (iii) have been duly approved by the Managing General Partner.
(b) The Bank shall be satisfied that each Credit Party (i) has
obtained all authorizations and approvals of all Governmental Bodies required
for the due execution, delivery and performance by such Credit Party of each of
the Loan Documents and Barclays Partnership Documents to which it is or will be
a party and for the exercise by the Bank of its rights and remedies under the
Loan Documents and Barclays Partnership Documents and (ii) shall be in
compliance with, and shall have obtained
<PAGE>
46
appropriate approvals pertaining to, all applicable laws, rules, regulations and
orders, including, without limitation, all governmental, environmental, ERISA
and other requirements, regulations and laws, the violation or failure to obtain
approvals for which would have a Material Adverse Effect as to such Credit
Party.
5.14 FCC Matters and Compliance. All of the FCC Licenses shall be
--------------------------
held by MLP Communications Company, shall be in full force and effect and shall
be subject to FCC Leases.
5.15 Accountant's Tax Letter. The Bank shall have received a copy of
-----------------------
a letter addressed to the Borrower prepared in contemplation of the Acquisition,
such letter to be in form, scope and substance reasonably satisfactory to the
Bank, from the Borrower's independent certified public accountants of nationally
recognized standing as to the tax basis and other tax attributes and
depreciation or amortization schedules of the Assets, in each case, owned by the
Borrower, all of which, as set forth in such letter shall not differ in any
significant respect from the Reference Projections.
5.16 Borrowing Certificate. The Bank shall have received a Borrowing
---------------------
Certificate dated the Closing Date, substantially in the form of Exhibit C,
signed by the chief executive officer or the chief financial officer of the
Borrower.
5.17 Payment of Indebtedness by the Seller. The Bank shall have
-------------------------------------
received information reasonably acceptable to it that all non-contingent
Indebtedness of the Seller for the period prior to the Closing Date (including,
without limitation, all intercompany Indebtedness, and all Indebtedness owing to
The First National Bank of Chicago) is simultaneously being either discharged,
paid in full or been assumed by the Borrower. Without in any way limiting the
foregoing, the Bank shall have received information reasonably acceptable to it
that all Indebtedness with respect to which a Lien (other than a Permitted Lien)
on the Assets or any portion thereof was held on or prior to the Closing Date
and all intercompany Indebtedness or Indebtedness of the Seller to its
Affiliates is simultaneously being either discharged or otherwise paid in full.
5.18 Senior Loan Documents. The Bank shall have received certified
---------------------
copies of all of the Senior Loan Documents, duly executed by the parties thereto
and in form and substance satisfactory to the Bank, together with all
agreements, instruments and other documents delivered in connection therewith.
All of the conditions precedent to the initial borrowing under the Senior Credit
Agreement shall have been satisfied.
5.19 Contributions of Equity; Capitalization. The Bank shall have
---------------------------------------
received evidence, in form and substance reasonably satisfactory to the Bank,
of: (i) the receipt by the Borrower of not less than $9,387,525 in cash as the
net proceeds
<PAGE>
47
of the issuance of 9,387,525 units of General Partnership Interests to the
Managing General Partner, (ii) the receipt by the Borrower of not less than
$13,477 in cash as the net proceeds of the issuance of 13,477 units of General
Partnership Interests to the Administrative General Partner, (iii) the receipt
by the Borrower of not less than $9,900 in cash as the net proceeds of the
issuance of 9,900 units of Class A-1 Partnership Interests to Centre Partners
Entities, (iv) the receipt by the Borrower of not less than $1,716,523 in cash
as the net proceeds from the issuance of 1,716,523 units of Class B Partnership
Interests to certain members of Muzak Management listed on Schedule 1.1(D) (of
which the proceeds from the Management Notes shall account for not greater than
50% of such amount in the aggregate), (v) the receipt by the Borrower of not
less than $1,347,575 in cash as the net proceeds of the issuance of 1,347,575
units of Class A-2 Partnership Interests to UBS, (vi) the receipt by the
Borrower of not less than $25,000 in cash as the Net Proceeds from the Issuance
of 25,000 units of Class A-2 Partnership Interests to Mr. John A. Hawkins, and
(vii) the Issuance by the Borrower of 8,000,000 units of Class C Partnership
Interests to the Seller, representing a deemed $8,000,000 capital contribution
to the Borrower. In addition, 977,089 units of Class A-2 Partnership Interest
are covered by the Option Agreement.
5.20 Representations and Warranties; No Default or Event of Default.
--------------------------------------------------------------
Each of the representations and warranties made by the Borrower in each Loan
Document and each Barclays Partnership Document to which it is a party shall be
true and correct as of the Closing Date. No Default or Event of Default shall
have occurred and be continuing on the Closing Date or after giving effect to
the Loan.
5.21 Partnership Interests. The Borrower, the other parties thereto
---------------------
and the Bank shall have entered into the Barclays Letter Agreement and the
Indemnity Letter, and the Bank shall have received the Partnership Agreement
duly executed by the parties thereto, in form and substance satisfactory to the
Bank.
5.22 Letter of Direction. The Bank shall have received a letter of
-------------------
direction from the Borrower addressed to the Bank with respect to the
disbursement of the proceeds of the Loan.
5.23 Subordination Provisions. The Bank shall have approved the
------------------------
terms and conditions of the Earn-out Note and the Exchange Notes and
documentation relating thereto and have received each of the Subordination
Agreements, duly executed and delivered by a duly authorized officer of each of
the parties thereto.
5.24 Fees. The Bank shall have received evidence satisfactory to it
----
that the total fee for services rendered by Centre Partners and CCI through the
Closing Date does not exceed $600,000 plus reasonable expenses.
<PAGE>
48
5.25 Examination of Books. The Bank shall have been afforded the
--------------------
opportunity prior to the Closing Date, to review the books, records, leases,
contracts, franchise contracts, satellite lease agreements, pension plans,
insurance coverage and properties of the Seller and to perform such other legal
due diligence regarding the Seller as the Bank shall have required, the results
of which review and due diligence shall have been reasonably satisfactory to the
Bank and its counsel.
5.26 Other Seller Matters. The Banks shall be satisfied in full as
--------------------
to the matters listed on the schedules to the Purchase Agreement.
5.27 Management. (a) The Bank shall be reasonably satisfied with the
----------
management and board of directors or general partners, as applicable, of each of
the Borrower, its Subsidiaries, the holders of the equity interests in the
Credit Parties and the Subordinated Indebtedness and the arrangements and
agreements by and among each of the Credit Parties. No change in Muzak
Management (as employed with the Seller immediately prior to the Closing Date)
shall have occurred or be contemplated.
(b) The Bank shall have received satisfactory evidence and in form
and substance of the equity ownership of the Borrower and the contributions made
by each equity owner in the Borrower. Centre Partners Entities shall hold a
majority and sole controlling interest in the Managing General Partner, a
majority of the Partnership Interests and a majority of the voting equity
interests in the Borrower. A Centre Partners Entity shall be the sole Managing
General Partner.
(c) The Borrower shall have delivered to the Bank copies of all
Executive Agreements (including, without limitation, the Management Option Plan
and all other stock options and warrants, if any, and an employment agreement
between the Borrower and Mr. John Jester) by and among any of the Credit Parties
or the General Partners, any shareholder of any thereof or any officer or
Affiliate of any thereof relating to any of the Credit Parties, each of which
shall be acceptable to the Bank.
5.28 Name Changes. On the Closing Date, there shall have been filed
------------
with the Secretary of State of the State of Delaware (and accepted thereby for
filing) (a) Certificates of Amendment pursuant to (S) 17-202 of the Delaware
Revised Uniform Limited Partnership Act, to change the name of: (i) the Borrower
to Muzak Limited Partnership; (ii) the Seller to MLP Limited Partnership, and
(iii) Muzak Investment Partners, L.P. to MIP Limited Partnership; and (b) an
Amendment to the Certificate of Incorporation pursuant to (S) 242 of the
Delaware General Corporation Law to change the name of Field/Muzak, Inc. to FMI
Corporation.
5.29 Projections, etc. The Bank shall have received the Borrower's
----------------
most recent projections, dated the Closing Date,
<PAGE>
49
in form and substance reasonably satisfactory to the Bank, of the future
financial performance of the Borrower and its Subsidiaries for the period ending
December 31, 1995, including the Pro Forma (the "Latest Projections") and such
------------------
other information relating to the Borrower and its Subsidiaries as the Bank may
reasonably have requested, in each case, in form and substance reasonably
satisfactory to the Bank. The financial results of the Borrower through July 31,
1992 and the information contained in the projections, dated July 24, 1992,
provided to the Bank by Centre Partners (the
"Reference Projections") shall, in the opinion of the Bank, be consistent in all
- ----------------------
material respects with the Latest Projections. In the opinion of the Bank,
there shall have occurred no event or financial result materially inconsistent
with achieving the results contained in the Reference Projections or which has
impaired the Bank's continuing confidence in the Reference Projections.
5.30 Accountant's Letter. The Bank shall have received a letter, in
-------------------
form and substance satisfactory to the Bank, from the Borrower addressed to the
Borrower's independent certified public accountants authorizing such accountants
to communicate with the Bank.
5.31 Additional Matters. All corporate and other proceedings, and
------------------
all documents, instruments and other legal matters to be executed, delivered or
provided pursuant to or in connection with the transactions contemplated by this
Agreement, the Note, the other Loan Documents, the Barclays Partnership
Documents and the other Related Transaction Documents shall be satisfactory in
form and substance to the Bank and its counsel in their reasonable judgment.
SECTION 6. AFFIRMATIVE COVENANTS
---------------------
The Borrower hereby agrees that, so long as the Loan remains
outstanding and unpaid or any other amount is owing to the Bank hereunder:
6.1 Financial Statements and Other Information. The Borrower shall
------------------------------------------
furnish or cause to be furnished to the Bank:
(a) as soon as practicable and in any event within forty-five days
after the close of each of the first three quarters of each Fiscal Year of the
Borrower, an unaudited combined and combining:
(i) balance sheet of the Borrower and its Subsidiaries;
(ii) statement of income of the Borrower and its Subsidiaries;
and
(iii) statement of cash flows of the Borrower and its
Subsidiaries,
<PAGE>
50
in each case, as at the end of and for the period commencing at the end of the
previous Fiscal Year and ending with such quarter just closed and for the period
commencing at the end of the previous quarter and ending with such quarter just
closed, setting forth for each such period in comparative form (x) the
corresponding figures for the applicable quarter and year to date of the
preceding Fiscal Year, and (y) the forecasts of the Borrower and its
Subsidiaries for such quarter and year to date previously delivered under
subsection 6.1(j), all in reasonable detail and certified by the chief executive
or financial officer of the Borrower to have been prepared in accordance with
GAAP, subject to normal recurring year-end audit adjustments, together with (A)
a schedule in form satisfactory to the Bank setting forth the Borrower's EBITDA
for such quarter, actual Capital Expenditures made by the Borrower and its
Subsidiaries during such quarter and indicating that such Capital Expenditures
were made in compliance with subsection 7.1; and (B) a schedule in form
satisfactory to the Bank of the computations used by the Borrower in determining
compliance with the covenants contained in subparagraphs (a), (b) and (c) of
subsection 6.17;
(b) as soon as practicable and in any event within ninety days after
the close of each Fiscal Year of the Borrower:
(i) an audited combined and combining balance sheet of the
Borrower and its Subsidiaries;
(ii) an audited combined and combining statement of income of the
Borrower and its Subsidiaries; and
(iii) an audited combined and combining statement of cash flows of
the Borrower and its Subsidiaries,
in each case, as at the end of and for the Fiscal Year just closed, setting
forth in comparative form (x) the corresponding figures for the preceding Fiscal
Year, and (y) the forecasts of the Borrower and its Subsidiaries for such Fiscal
Year previously delivered under subsection 6.1(j), all in reasonable detail and
(except as to forecasts and comparisons with forecasts) certified (without any
qualification or exception deemed material by the Bank) by independent public
accountants selected by the Borrower and satisfactory to the Bank; and
concurrently with such financial statements, a written statement signed by such
independent accountants (x) to the effect that, in making the examination
necessary for their certification of such financial statements, they have not
obtained any knowledge of the existence of any Default or Event of Default, or,
if such independent accountants shall have obtained from such examination any
such knowledge, they shall disclose in such written statement the Default or
Event of Default and the nature thereof, it being understood that such
independent accountants shall be under no liability, directly, or indirectly, to
anyone for failure to obtain knowledge of any such Default or Event of Default,
and (y) setting forth calculations of the Borrower as specifically
<PAGE>
51
reviewed by such auditors as to the compliance by the Borrower with all the
covenants contained in subsections 6.17 and 7.1;
(c) as soon as practicable in an any event within forty-five days
after the close of each calendar month (other than any calendar month at the end
of which a fiscal quarter or Fiscal Year ends), a combined and combining:
(i) balance sheet of the Borrower and its Subsidiaries;
(ii) statement of income of the Borrower and its Subsidiaries;
and
(iii) a statement of cash flows of the Borrower and its
Subsidiaries at the end of and for the period commencing at the end of the
previous Fiscal Year and ending with such month just closed and for the
period commencing at the end of the previous month and ending with such
month just closed,
in each case prepared by Muzak Management of the Borrower, setting forth in
comparative form (x) the corresponding figures for the appropriate month and
year to date of the previous Fiscal Year and (y) the forecasts of the Borrower
and its Subsidiaries for such month and year to date previously delivered under
subsection 6.1(j), all in reasonable detail (including, without limitation,
stating the amount of Interest Expense on the Loan, and all other Indebtedness
for Borrowed Money of the Borrower and its Subsidiaries for such calendar month
and the depreciation and amortization and the rental expense of the Borrower and
its Subsidiaries for such calendar month) and certified by the chief executive
or financial officer of the Borrower to have been prepared in accordance with
GAAP, subject to normal year-end adjustments;
(d) promptly, and in any event within fifteen days of receipt
thereof, copies of all management letters, if any, submitted to the Borrower or
any of its Subsidiaries by its auditors, in connection with each annual or
interim audit or review of its books by such auditors;
(e) promptly, and in any event within five days of the issuance
thereof, copies of all reports, if any, to or other documents filed by the
Borrower or any of its Subsidiaries with the Securities and Exchange Commission
under the Securities Act of 1933 or the Securities Exchange Act of 1934 (other
than on Form S-8 or 8-A or similar forms);
(f) concurrently with the delivery of the financial statements
required to be furnished by subsection 6.1(a) or subsection 6.1(b), a
certificate signed by the chief executive or financial officer of the Borrower,
(x) stating that a review of the activities of the Borrower and its Subsidiaries
during such fiscal quarter or Fiscal Year, as the case may be, has been made
<PAGE>
52
under his immediate supervision with a view to determining whether the Borrower
and its Subsidiaries has observed, performed and fulfilled all of its respective
obligations under each Loan Document to which it is a party, and (y)
demonstrating, in a format satisfactory to the Bank, the compliance by the
Borrower and its Subsidiaries with the covenants contained in subsections 6.17,
7.1, 7.3, 7.4 and 7.6 hereof and stating that there existed during such fiscal
quarter or Fiscal Year no Default, or Event of Default or if any such Default or
Event of Default existed, specifying the nature thereof, the period of existence
thereof and what action the Borrower or its Subsidiary proposes to take, or has
taken, with respect thereto;
(g) promptly upon the occurrence of any Event of Default, and in any
event within five days thereof, a certificate signed by the chief executive or
financial officer of the Borrower, specifying the nature thereof and the action
the Borrower or its Subsidiary proposes to take or has taken with respect
thereto;
(h) promptly, and in any event within five days of the commencement
thereof, Written Notice of any litigation of which the Borrower or any
Subsidiary has knowledge, including arbitrations, and of any proceedings before
any Governmental Body which would, if successful, cause a Material Adverse
Effect or where the amount involved exceeds (i) for the first three years
following the Closing Date, $500,000; (ii) for the fourth through sixth year
following the Closing Date, $750,000 and (iii) thereafter, $1,000,000;
(i) promptly, and in any event within fifteen days thereof, such
other information respecting the business, operations and financial condition of
the Borrower or any of its Subsidiaries as the Bank may from time to time
reasonably request;
(j)(i) not later than thirty days prior to the commencement of each
Fiscal Year of the Borrower beginning with the Fiscal Year commencing on January
1, 1993, a two Fiscal Year forecast of the financial condition and results of
operations of the Borrower and its Subsidiaries for such two Fiscal Years
(covering in any event actual balance sheets, statements of cash flow and of
income); and (ii) not later than thirty days prior to the commencement of each
Fiscal Year of the Borrower, an annual plan for the Borrower and its
Subsidiaries for the immediately succeeding Fiscal Year, indicating balance
sheet and statements of cash flow and income on a monthly basis; in all
instances, in form, scope and substance reasonably satisfactory to the Bank;
(k)(A) so long as such notices are required pursuant to the Senior
Credit Agreement, promptly, and in any event within five days thereof, notice:
(i) of receipt by a Credit Party or any Subsidiary thereof, or any
tenant or other occupant of any property
<PAGE>
53
owned, operated, leased or occupied by a Credit Party or Subsidiary
thereof, of any claim, complaint, charge or notice of a violation or
potential violation of any Environmental Law;
(ii) of the occurrence of a spill or other Release of a Hazardous
Material upon, under or about or affecting any of the properties owned,
operated, leased or occupied by a Credit Party or Subsidiary thereof, or
Hazardous Materials at levels or in amounts that may have to be reported,
remedied or responded to under any Environmental Law are detected on or in
the soil or groundwater;
(iii) that a Credit Party or Subsidiary thereof is or may be liable
for any costs of cleaning up or otherwise responding to a Release of
Hazardous Materials;
(iv) that any part of the properties owned, operated, leased or
occupied by a Credit Party or any Subsidiary thereof is or may be subject
to a Lien under any Environmental Law;
(v) that a Credit Party or Subsidiary will undertake or has
undertaken any cleanup or other response action with respect to any
Hazardous Material; and
(B) following any refinancing of the Senior Credit Agreement, any notice
required to be delivered pursuant to any agreement with respect to such
refinancing relating to any Environmental Law, Hazardous Materials or Releases
on or before the date such notice is required pursuant to such agreement.
(1) promptly, and in any event within five days thereof, notice:
(i) that MLP Communications Company (or the Borrower or any other FCC
Affiliate of the Borrower) has received notice from a Governmental Body
that it is at risk of loss or has lost use or possession of an FCC License;
(ii) that the Borrower has lost, or is aware of any threatened loss,
of the use of Channel Capacity under any of the agreements entered into,
from time to time, by the Borrower or any of its FCC Affiliates with any
Channel Capacity Providers (including, without limitation, MicroSpace)
other than losses in the ordinary course of business and which losses in
the aggregate could not have a Material Adverse Effect;
(m) not later than 60 days after entering into such agreement or
agreements, copies of all new Executive Agreements; and
<PAGE>
54
(n) promptly upon the occurrence thereof, and in any event within 10
days thereof, notice of any change in the ownership interests of the Borrower.
6.2 Taxes and Claims. The Borrower shall, and shall cause each of
----------------
its Subsidiaries to, pay and discharge when due (except to the extent that any
such taxes, assessments, governmental charges or claims are diligently contested
in good faith by appropriate proceedings and proper reserves are established on
the books of the Borrower or such Subsidiary) (a) all taxes, assessments and
governmental charges upon or against it or its properties or assets prior to the
date on which penalties attach thereto and (b) all lawful claims, whether for
labor, materials, supplies, services or anything else, which might or could, if
unpaid, become a Lien or charge upon its properties or assets.
6.3 Insurance. (a) The Borrower shall, and shall cause each of its
---------
Subsidiaries to, (i) keep all its properties adequately insured at all times
with responsible insurance carriers, in amounts and pursuant to insurance
policies reasonably acceptable to the Managing General Partner, against loss or
damage by fire and other hazards, (ii) maintain adequate insurance at all times
with responsible insurance carriers, in amounts and pursuant to insurance
policies reasonably acceptable to the Managing General Partner, against
liability on account of damage to Persons and property and under all applicable
workers' compensation laws and (iii) maintain all other insurance required by
the Senior Credit Agreement in accordance with the terms thereof. For purposes
of complying with this subsection 6.3(a), adequate insurance shall in any event
prevent the Borrower and its Subsidiaries from becoming a co-insurer (excluding
any deductibles thereunder reasonably acceptable to the Managing General
Partner).
(b) The Borrower shall, and shall cause each of its Subsidiaries to,
from time to time upon request of the Bank, promptly furnish or cause to be
furnished to the Bank evidence, in form and substance reasonably satisfactory to
the Bank, of the maintenance of all insurance required to be maintained by this
subsection 6.3, including, but not limited to, such copies as the Bank may
request of policies, certificates of insurance, riders and endorsements relating
to such insurance and proof of premium payments.
6.4 Books and Reserves. The Borrower shall and shall cause each of
------------------
its Subsidiaries to:
(a) maintain, at all times, true and complete books, records and
accounts in which true and correct entries shall be made of its
transactions in accordance with GAAP; and
(b) by means of appropriate entries, reflect in its accounts and in
all financial statements furnished pursuant to subsection 6.1 proper
liabilities and reserves for all
<PAGE>
55
taxes and proper provision for depreciation and amortization of its
properties and bad debts, all in accordance with GAAP.
6.5 Properties in Good Condition. Except to the extent that failure
----------------------------
to do so would not have a Material Adverse Effect, the Borrower shall keep, and
shall cause each of its Subsidiaries to keep, its properties in good repair,
working order and condition, ordinary wear and tear excepted, in accordance with
prudent operating procedures relating thereto and, from time to time, make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto, so that the business carried on may be properly and advantageously
conducted at all times in accordance with prudent business management.
6.6 Maintenance of Existence. Except as otherwise required under
------------------------
subsection 6.15 or as permitted by subsection 7.5, the Borrower shall preserve
and maintain, and cause each of its Subsidiaries to preserve and maintain, its
statutory existence, rights, franchises and licenses, except where the failure
to do so would not have a Material Adverse Effect.
6.7 Inspection by the Bank. The Borrower shall allow, and shall
----------------------
cause each of its Subsidiaries to allow, any representative of the Bank at the
Bank's expense to visit and inspect any of its properties, to examine its books
of account and other records and files, to make copies thereof and to discuss
its affairs, business, finances and accounts with its officers and employees and
independent accountants (and the Borrower hereby irrevocably authorizes its
independent accountants to discuss with the Bank the financial affairs of the
Borrower and its Subsidiaries), all at such reasonable times upon reasonable
notice during normal business hours up to twice in each Fiscal Year (or, during
the continuance of a Default or Event of Default, at such times and as often as
the Bank may reasonably request without notice).
6.8 Pay Indebtedness to Bank and Perform Other Covenants. The
----------------------------------------------------
Borrower shall (a) make full and timely payment of the Loan and all other
Obligations to the Bank, whether now existing or hereafter arising, and (b)
strictly comply, and cause each of its Subsidiaries to strictly comply, with all
the terms and covenants contained in each Loan Document to which it is a party,
all at the times and places and in the manner set forth therein.
6.9 Notice of Default. The Borrower shall promptly, and cause each
-----------------
of its Subsidiaries to promptly (and in any event within 5 days) notify the Bank
in writing of (a) any Default or Event of Default or (b) a mature event of
default under any other agreement in respect of (i) Indebtedness for Borrowed
Money (excluding Indebtedness for Borrowed Money pursuant to (x) Capital Leases
with respect to motor vehicles or (y) the Torrance Note) in excess of $1,000,000
to which the Borrower or any of its
<PAGE>
56
Subsidiaries is a party, and (ii) Indebtedness for Borrowed Money pursuant to
Capital Leases with respect to motor vehicles in excess of $2,500,000 in the
aggregate, in each case describing the nature thereof and the action the
Borrower proposes to take with respect thereto.
6.10 Reporting of Misrepresentations. In the event that the Borrower
-------------------------------
or any Subsidiary discovers that any representation or warranty made in any Loan
Document by any Credit Party was incorrect in any material respect when made,
the Borrower will promptly report, or shall cause such Subsidiary promptly to
report, the same to the Bank and take, or cause to be taken, all available steps
to correct such misrepresentation or breach of warranty.
6.11 Compliance with Laws, Etc. The Borrower shall comply, and shall
-------------------------
cause each of its Subsidiaries to comply, in all material respects, with all
applicable laws, rules, regulations and orders, and the Borrower shall duly
observe, and cause each of its Subsidiaries to duly observe, in all material
respects, all valid requirements of applicable governmental authorities and all
applicable statutes, rules and regulations, including, without limitation, all
applicable statutes, rules and regulations relating to public and employee
health and safety, except to the extent that failure to do so would not have a
Material Adverse Effect.
6.12 ERISA. (a) The Borrower shall pay and discharge, and shall
-----
cause each Credit Party and each ERISA Affiliate to pay and discharge, when due
any liability imposed upon it pursuant to the provisions of Title IV of ERISA.
(b) The Borrower shall deliver to the Bank promptly, and in any
event within ten days (unless otherwise specified below and, in the case of
clause (viii) or (ix) below, so long as such notices are required pursuant to
the Senior Credit Agreement), after
(i) the Borrower knows, or has reason to know, of the occurrence
of any Reportable Event with respect to any Pension Benefit Plan which is
subject to Title IV of ERISA, a copy of the materials that are filed by the
applicable plan administrator with the PBGC provided that a copy of such
materials shall not be furnished to the Bank until ten days after receipt
of a copy of such materials by the Borrower;
(ii) the receipt of notice by any Credit Party or an ERISA
Affiliate or any administrator of any Pension Benefit Plan which is
maintained by any Credit Party or any ERISA Affiliate that has been given
to participants or beneficiaries or filed with the PBGC a notice of intent
to terminate any Pension Benefit Plan under Section 4041(c) of ERISA, a
copy of any such notice;
<PAGE>
57
(iii) the receipt of notice by any Credit Party or an ERISA
Affiliate or any administrator of any Pension Benefit Plan which is
maintained by any Credit Party or any ERISA Affiliate from the PBGC of the
PBGC's intention to terminate any Pension Benefit Plan or to appoint a
trustee to administer any Pension Benefit Plan under Section 4042 of ERISA,
a copy of such notice;
(iv) the filing thereof with the Internal Revenue Service, copies
of each annual report that is filed on Treasury Form 5500 with respect to
any Pension Benefit Plan subject to Title IV of ERISA which is maintained
by any Credit Party, together with any actuarial statements on Schedule B
to such Form 5500;
(v) any Credit Party knows or has reason to know of any event or
condition which might constitute grounds under the provisions of Section
4042 of ERISA for the termination of (or the appointment of a trustee to
administer) any Pension Benefit Plan, an explanation of such event or
condition;
(vi) the receipt by any Credit Party of an assessment or withdrawal
liability under Section 4201 of ERISA from a Multiemployer Plan, a copy of
such assessment;
(vii) any ERISA Affiliate has actual knowledge of the termination or
insolvency (under Sections 4241 or 4245 of ERISA) of any Multiemployer Plan
to which any Credit Party or any ERISA Affiliate contributes, notice of
such event within thirty days of such knowledge;
(viii) (i) due inquiry, the Borrower has knowledge that as of the
last day in any calendar year, the Liabilities of all Underfunded Pension
Benefit Plans that are maintained by the ERISA Affiliates exceeds
$1,000,000, or (ii) any ERISA Affiliate purchases an entity (which itself
would, upon the purchase, be deemed an ERISA Affiliate) with any
Underfunded Pension Benefit Plans: (A) notice from the Borrower of such
underfunding or purchase; (B) a copy of the latest annual report that is
filed on Treasury Form 5500 with respect to any Underfunded Pension Benefit
Plan, together with any actuarial statements on Schedule B to such form;
and (C) any other information as the Bank may reasonably request with
respect to any Underfunded Pension Benefit Plan and/or with respect to any
ERISA Affiliate maintaining or contributing to such Plan. As used herein,
the term "Underfunded Pension Benefit Plan" shall mean a Pension Benefit
Plan subject to Title IV of ERISA that has Liabilities. As used herein, the
term "Liabilities" shall mean the liabilities as shown on Schedule B of the
latest Form 5500 filed with respect to each Underfunded Pension Benefit
Plan determined as of the latest actuarial valuation date of such Plan and
calculated in accordance with the actuarial assumptions and methods used by
such Plan for purposes of Section 4041(c), 4062,
<PAGE>
58
4063 or 4064 of ERISA, or if such calculation is not available (without
imposing an obligation on the ERISA Affiliate to cause such a calculation
to be conducted), determined as of the latest actuarial valuation date of
such Plan and calculated in accordance with the actuarial assumptions and
methods used by such Plan for purposes of Section 412 of the Code and
determined net of the fair market value of the assets of such Plan as shown
on the latest Form 5500 filed with respect to such Plan;
(ix)(i) the receipt by any ERISA Affiliate of an assessment of
withdrawal liability under Section 4201 of ERISA from a Multiemployer Plan
which, when combined with all other preexisting assessments of withdrawal
liability under Section 4201 of ERISA received by all other ERISA
Affiliates, and determined after giving effect to any payments theretofore
made by such ERISA Affiliates and all reductions to such preexisting
assessments made by such Multiemployer Plans, or by arbitrators, federal
courts or by operation of law, exceeds $1,000,000; or (ii) any ERISA
Affiliate purchases an entity (which itself would, upon the purchase, be
deemed an ERISA Affiliate), which has a potential withdrawal liability in
excess of $1,000,000 to the extent that the Borrower has actual knowledge
thereof: (A) a copy of such assessment, together with any other information
as the Bank may reasonably request with respect to such assessment and/or
with respect to any ERISA Affiliate contributing to such Multiemployer
Plan; or (B) notice from the Borrower of such purchase; or
(x) any Credit Party knows or has reason to know that an
application has been made to the Secretary of the Treasury for a waiver of
the minimum funding standard under the provisions of Section 412 of the
Code with respect to any Pension Benefit Plan, a copy of such application;
or
(xi) following any refinancing of the Senior Credit Agreement, any
additional notice required to be delivered pursuant to any agreement with
respect to such refinancing relating to ERISA matters on or before the date
such notice is required pursuant to such agreement; and
in each case described above, together with a statement signed by an appropriate
officer of the applicable Credit Party or ERISA Affiliate setting forth details
as to such Reportable Event, notice event or condition and the action that will
be taken with respect thereto, if any such action is required.
6.13 Further Assurances. The Borrower shall, and shall cause each of
------------------
its Subsidiaries to, at its cost and expense, upon request of the Bank, duly
execute and deliver, or cause to be duly executed and delivered, to the Bank
such further instruments and do and cause to be done such further acts as may be
necessary or proper in the reasonable opinion of the Bank to
<PAGE>
59
carry out more effectually the provisions and purposes of this Agreement or any
other Loan Document.
6.14 Environmental Matters. (a) The Borrower shall, and shall cause
---------------------
each of its Subsidiaries to, comply in all material respects with the provisions
of all Environmental Laws and all applicable Federal, state and local
occupational health, safety and sanitation laws, ordinances, codes, rules and
regulations, permits, licenses and interpretations and orders of regulatory and
administrative authorities with respect thereto, and shall keep its properties
and the properties of its Subsidiaries free of any Lien imposed pursuant to any
Environmental Law. The Borrower shall not cause or suffer or permit, and shall
not suffer or permit any of its Subsidiaries, to cause or suffer or permit, the
property of the Borrower or such Subsidiary, to be used for the generation,
production, processing, handling, storage, transporting or disposal of any waste
or discarded material or any Hazardous Materials except Hazardous Materials used
in the ordinary course of business of the Borrower and disclosed on Schedule
4.17, in which case such Hazardous Materials shall be used, stored, generated,
treated and disposed of only in material compliance with Environmental Law, and
except the removal or the taking of remedial action in response to Hazardous
Materials on or about the properties owned, operated, leased or occupied by the
Borrower or any of its Subsidiaries.
(b) (i) So long as required pursuant to the Senior Credit Agreement,
the Borrower shall (x) supply to the Bank copies of all submissions by the
Borrower or any of its Subsidiaries to any Governmental Body and of the reports
of all environmental audits and of all other environmental tests, studies or
assessments (including the data derived from any sampling or survey of asbestos,
soil, or subsurface or other materials or conditions) that may be conducted or
performed (by or on behalf of the Borrower or any of its Subsidiaries) on or
regarding the properties owned, operated, leased or occupied by the Borrower or
any of its Subsidiaries or regarding any conditions that might have been
affected by Hazardous Materials on or Released or removed from such properties
and (y) permit and authorize, and shall cause its Subsidiaries to permit and
authorize, the consultants, attorneys or other persons that prepare such
submissions or reports or perform such audits, tests, studies or assessments to
discuss non-privileged portions of such submissions or reports with the Bank and
(ii) following any amendment or refinancing of the Senior Credit Agreement, the
Borrower shall grant to the Bank all rights and privileges granted to the Senior
Lenders relating to environmental matters pursuant to the Senior Credit
Agreement, as so amended or modified.
(c) (A) So long as required pursuant to the Senior Credit Agreement,
the Borrower shall promptly (and in no event more than two Business Days after
the Borrower becomes aware or
<PAGE>
60
otherwise informed of such event) provide oral and Written Notice to the Bank
upon the happening of any of the following:
(i) the Borrower, any of its Subsidiaries, or any tenant or other
occupant of any property of the Borrower or any Subsidiary thereof receives
actual notice of any claim, complaint, charge or notice of a violation or
potential violation of any Environmental Law;
(ii) there has been a spill or other Release of Hazardous Materials
upon, under or about or affecting any of the properties owned, operated,
leased or occupied by the Borrower or any Subsidiary thereof, or Hazardous
Materials at levels or in amounts that may have to be reported, remedied or
responded to under Environmental Law are detected on or in the soil or
groundwater;
(iii) the Borrower or any Subsidiary thereof is or may be liable for
any costs of cleaning up or otherwise responding to a Release of Hazardous
materials;
(iv) any part of the properties owned, operated, leased or occupied by
the Borrower or any Subsidiary thereof is or may be subject to a Lien under
any Environmental Law; or
(v) the Borrower or any Subsidiary thereof undertakes any cleanup or
other response action with respect to any Hazardous Materials; and
(B) following any amendment or refinancing of the Senior Credit Agreement,
the Borrower shall give the Bank any notice required to be delivered pursuant to
the Senior Credit Agreement, as amended or refinanced, relating the
environmental matters.
(d) The Borrower shall timely undertake and complete any cleanup or
other response actions required by any Environmental Law.
(e) Without in any way limiting the scope of subsection 10.5 and in
addition to any obligations thereunder, the Borrower hereby indemnifies and
agrees to hold the Bank harmless from and against any liability, loss, damage,
suit, action or proceeding arising out of its business or the business of its
Subsidiaries pertaining to Hazardous Materials, including, but not limited to,
claims of any Governmental Body or any third person, arising under any
Environmental Law or under tort, contract or common law. To the extent laws of
the United States or any applicable state or local law in which property owned,
operated, leased or occupied by the Borrower or any of its Subsidiaries is
located provide that a Lien upon such property of the Borrower or any of its
Subsidiaries may be obtained for the removal of Hazardous Materials which have
been or may be Released, no later than sixty days after notice is given by the
Bank to the Borrower, the Borrower shall deliver to the Bank a
<PAGE>
61
report issued by a qualified third party engineer certifying as to the existence
of any Hazardous Materials located upon or beneath the specified property. To
the extent any Hazardous Materials located therein or thereunder either (i)
subject the property to Lien or (ii) require removal to safeguard the health of
any persons, the removal thereof shall be an affirmative covenant of the
Borrower hereunder.
6.15 Subsidiaries. Unless the Borrower shall have obtained the prior
------------
written consent of the Bank to the contrary, the Borrower will dissolve and
liquidate (i) the Special Subsidiary owning assets in the State of Washington
not later than the third day next following the Closing Date; (ii) the Special
Subsidiary owning assets in the State of California not later than the 35th day
next following the Closing date; and (iii) the Special Subsidiary owning assets
in the State of New York not later than the 190th day next following the Closing
Date. The Borrower shall not own any Subsidiaries other than the Special
Subsidiaries (which shall be dissolved as set forth in the next preceding
sentence) unless the Borrower shall have complied with the provisions of
subsection 7.13 and 6.18 with respect to any such Subsidiary.
6.16 Board Observation Rights. The Borrower shall provide the Bank
------------------------
with 3 days notice of each official meeting of the board of directors (which
shall occur not less than once per fiscal quarter), advisory committee or other
governing body of the Borrower and permit representatives of the Bank to attend
such meeting.
6.17 Financial Covenants. (a) Interest Coverage Ratio. The
------------------- -----------------------
Borrower covenants and agrees that the Interest Coverage Ratio shall be, for the
period of four consecutive fiscal quarters ending on the last day of each March,
June, September and December of each of the Fiscal Years of the Borrower set
forth below, not less than the ratio set forth below opposite such day:
<TABLE>
<CAPTION>
Period of Four Fiscal
Quarters Ending on the
Following Dates: Ratio
---------------------- -----
<S> <C>
December 31, 1992 1.10 to 1.00
March 31, 1993 1.10 to 1.00
June 30, 1993 1.10 to 1.00
September 30, 1993 1.10 to 1.00
December 31, 1993 1.20 to 1.00
March 31, 1994 1.30 to 1.00
June 30, 1994 1.35 to 1.00
September 30, 1994 1.35 to 1.00
December 31, 1994 1.50 to 1.00
March 31, 1995 1.65 to 1.00
June 30, 1995 1.75 to 1.00
September 30, 1995 1.85 to 1.00
December 31, 1995 2.10 to 1.00
</TABLE>
<PAGE>
62
<TABLE>
<S> <C>
March 31, 1996 2.25 to 1.00
June 30, 1996 2.25 to 1.00
September 30, 1996 2.25 to 1.00
December 31, 1996 2.25 to 1.00
March 31, 1997 2.25 to 1.00
June 30, 1997 2.25 to 1.00
September 30, 1997 2.25 to 1.00
December 31, 1997 2.25 to 1.00
March 31, 1998 2.50 to 1.00
June 30, 1998 2.50 to 1.00
September 30, 1998 2.50 to 1.00
December 31, 1998 2.50 to 1.00
March 31, 1999 2.50 to 1.00
June 30, 1999 2.50 to 1.00
September 30, 1999 2.50 to 1.00
December 31, 1999 2.50 to 1.00
March 31, 2000 2.50 to 1.00
June 30, 2000 2.50 to 1.00
September 30, 2000 2.50 to 1.00
December 31, 2000 2.50 to 1.00
March 31, 2001 2.50 to 1.00
June 30, 2001 2.50 to 1.00
September 30, 2001 2.50 to 1.00
December 31, 2001 2.50 to 1.00
March 31, 2002 2.50 to 1.00
June 30, 2002 2.50 to 1.00
</TABLE>
(b) Fixed Charge Coverage Ratio. The Borrower covenants and agrees
---------------------------
that, prior to any material refinancing of the Indebtedness incurred pursuant to
the Senior Credit Agreement, the Fixed Charge Coverage Ratio shall be, for and
as of the last day of each Fiscal Year of the Borrower, not less than 1.00 to
1.00.
(c) Minimum Net Worth. The Borrower covenants and agrees that the
-----------------
Net Worth of the Borrower and its Subsidiaries, on a combined basis, shall be,
as of the last day of each Fiscal Year of the Borrower set forth below, not less
than the amount set forth below opposite such Fiscal Year:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
1992 $13,500,000
1993 $11,925,000
1994 $12,450,000
1995 $13,950,000
1996 $15,000,000
1997 $15,750,000
1998 $15,750,000
1999 $15,750,000
2000 $15,750,000
2001 $15,750,000
</TABLE>
<PAGE>
63
6.18 Guaranties. Upon the formation or acquisition, after the
----------
Closing Date, of any Subsidiary of the Borrower, such Subsidiary shall execute
and deliver to the Bank an unsecured guaranty (subordinated pursuant to Section
8 hereof to any Guaranty (as defined in the Senior Credit Agreement) made by
such Subsidiary), in form and substance satisfactory to the Bank (each as
amended, supplemented or otherwise modified from time to time in accordance with
its terms, a "Guaranty"), of all then existing or thereafter incurred
--------
Obligations. Nothing contained in this subsection 6.18 shall permit the Borrower
or any Subsidiary thereof to form or acquire any Subsidiary which is otherwise
prohibited by this Agreement, including, without limitation, subsection 7.12.
6.19 Access to Accountants. The Borrower authorizes the Bank to
---------------------
discuss the financial condition of the Borrower and its Subsidiaries with the
Borrower's independent certified public accountants upon reasonable notice to
the Borrower of its intention to do so. The Borrower shall be given the
reasonable opportunity to participate in any such discussion. Within 10 days
after the Closing Date, the Borrower shall deliver a letter to such accountants
authorizing them to comply with the provisions of this subsection 6.19.
SECTION 7. NEGATIVE COVENANTS
------------------
The Borrower hereby agrees that, so long as the Note remains
outstanding and unpaid, or any other amount is owing to the Bank hereunder, the
Borrower shall not, and shall not suffer or permit any of its Subsidiaries to,
directly or indirectly:
7.1 Capital Expenditures. (a) Make or capitalize, directly or
--------------------
indirectly, or otherwise permit Capital Expenditures of the Borrower and its
Subsidiaries to exceed, in any Fiscal Year of the Borrower, or make any
commitment for any such Capital Expenditures or costs to be paid or incurred
during any such period, in excess of the aggregate amount set forth below
opposite such Fiscal Year:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1992 $2,250,000
December 31, 1993 $4,500,000
December 31, 1994 $4,500,000
December 31, 1995 $5,000,000
December 31, 1996 $5,500,000
December 31, 1997 $6,000,000
December 31, 1998 $6,000,000
December 31, 1999 $6,500,000
December 31, 2000 $6,500,000
December 31, 2001 $7,000,000
December 31, 2002 $7,000,000
</TABLE>
<PAGE>
64
; provided that up to 100% of any such amount, if not so expended in the period
--------
for which it is permitted above, may be carried over for expenditure in the next
following or any succeeding year; provided, further, that in no event shall the
-------- -------
aggregate amount of Capital Expenditures described in this clause (a) in any
Fiscal Year, after giving effect to any such carrying over of any amount, exceed
the amount set forth below opposite such Fiscal Year:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ----------
<S> <C>
December 31, 1992 $2,250,000
December 31, 1993 $5,000,000
December 31, 1994 $5,500,000
December 31, 1995 $6,000,000
December 31, 1996 $6,500,000
December 31, 1997 $7,000,000
December 31, 1998 $7,000,000
December 31, 1999 $7,500,000
December 31, 2000 $7,500,000
December 31, 2001 $8,000,000
December 31, 2002 $8,000,000
</TABLE>
(b) Enter into a Capital Lease in any Fiscal Year of the Borrower
which, together with one or more Capital Leases, if any, entered into by the
Borrower and its Subsidiaries in such Fiscal Year, provides for aggregate value
of the assets financed under such Capital Lease or Capital Leases (as such
values are required under GAAP to be recorded on the Borrower's balance sheet)
of more than (i) $1,250,000, in the case of the Fiscal Year ending December 31,
1992, December 31, 1993, December 31, 1994 or December 31, 1995 or (ii)
$1,500,000, in the case of any such Fiscal Year thereafter.
7.2 Liens. Create, incur, assume or suffer to exist any Lien upon
-----
any of its property or assets of any character, whether owned at the date hereof
or hereafter acquired, or hold or acquire any property or assets of any
character under conditional sales, finance lease or other title retention
agreements, other than Permitted Encumbrances.
7.3 Indebtedness. Create, incur, assume or suffer to exist,
------------
contingently or otherwise, any Indebtedness, other than (collectively,
"Permitted Indebtedness"):
----------------------
(a) present or future Indebtedness under the Loan Documents or the
Barclays Partnership Documents;
(b) present or future Indebtedness under the Senior Loan Documents,
including Hedge Agreements with respect to the loans pursuant to the Senior
Credit Agreement, provided that the amount of the Revolving Loans made on
--------
the Closing Date shall not exceed $3,000,000;
<PAGE>
65
(c) other present or future Senior Indebtedness, subject to
compliance with the conditions set forth in the definition of such term in
subsection 1.1;
(d) Indebtedness for accrued interest in an approximate amount of
$875,000 under the Torrance Note;
(e) unsecured Current Liabilities incurred in the ordinary course of
business other than unsecured Current Liabilities for Indebtedness for
Borrowed Money;
(f) Indebtedness (not overdue unless contested by appropriate
proceedings) secured by Liens described in clauses (a) through (i) of the
definition of "Permitted Encumbrances";
(g) Indebtedness for Borrowed Money and Contingent Obligations set
forth on Schedule 7.3;
(h) Indebtedness arising under the Purchase Agreement (including
contractual indemnity obligations thereunder);
(i) Indebtedness relating to the Specified Transactions;
(j) Indebtedness for taxes, assessments or other governmental charges
or levies, provided that payment thereof shall not at the time be required
--------
in accordance with the provisions of subsection 6.2; and
(k) other Indebtedness for Borrowed Money subordinated to
Indebtedness hereunder on terms and conditions satisfactory to the Bank not
in excess of (i) during the first three years following the Closing Date,
$1,000,000, (ii) during the fourth through sixth year following the Closing
Date, $2,000,000 and (iii) thereafter, $3,000,000, in each case outstanding
at any time.
7.4 Loans, Investments and Guaranties. Lend or advance money or
---------------------------------
credit to any Person, or invest in (by capital contribution, creation of
Subsidiaries or otherwise), or purchase or repurchase the stock or Indebtedness,
of all or a substantial part of the assets or properties, of any Person, or
enter into any exchange of securities with any Person, or guarantee, assume,
endorse or otherwise become responsible for (directly or indirectly or by any
instrument having the effect of assuring any Person's payment or performance or
capability) the Indebtedness, performance, obligations, stock or dividends of
any Person (each of the foregoing, an "Investment"), or agree to do any of the
----------
foregoing, or permit or suffer to permit any of its subsidiaries to do so, other
than:
(a) endorsement of negotiable instruments for deposit or collection
in the ordinary course of business;
<PAGE>
66
(b) (i) Investments in securities issued, or that are directly and
fully guaranteed or insured, by the United States Government or any agency
or instrumentality thereof having maturities of not more than six months
from the date of acquisition, (ii) time deposits and certificates of
deposit having maturities of not more than six months from the date of
acquisition of (x) the Bank or (y) any other domestic commercial bank
having capital and surplus in excess of $100,000,000, the holding company
of which has outstanding commercial paper meeting the requirements
specified in clause (iv) below, (iii) repurchase agreements with a term of
not more than seven days for underlying securities of the types described
in clauses (i) and (ii) above (provided, that the underlying securities of
--------
the type described in clause (i) may have maturities of more than six
months from the date of acquisition) entered into with the Bank or any
other bank meeting the qualifications specified in clause (ii) above or
with securities dealers of recognized national standing, provided, that the
-------- ----
terms of such agreements comply with the guidelines set forth in the
Federal Financial Institutions Examination Council Supervisory Policy
Repurchase Agreements of Depositary Institutions With Securities Dealers
and Others as adopted by the Comptroller of the Currency on October 31,
1985 (the "Supervisory Policy"), and provided, further, that possession or
------------------ -------- -------
control of the underlying securities is established as provided in the
Supervisory Policy, (iv) commercial paper or other corporate obligations
rated (as of the date of acquisition thereof) at least A-1 or the
equivalent thereof by Standard & Poor's Corporation and P-1 or the
equivalent thereof by Moody's Investors Service, Inc. and in either case
maturing within six months after the date of its acquisition; and (v)
shares of funds registered under the Investment Company Act of 1940, as
amended, having assets of at least $100,000,000 which invest only in
obligations described above and which shares are rated by Moody's Investors
Service, Inc. or Standard & Poor's Corporation in one of its two highest
rating categories assigned by such agencies for obligations of such nature.
(c) Investments representing stock or obligations issued to the
Borrower or any of its Subsidiaries in settlement of claims against any
other Person by reason of a composition or readjustment of debt or a
reorganization of any debtor of the Borrower or such Subsidiary;
(d) Investments representing the Indebtedness of any Person owing as
a result of the sale by the Borrower or any of its Subsidiaries in the
ordinary
<PAGE>
67
course of business of products or services (on customary trade terms);
(e) Investments in the stock of any present Special Subsidiary, but
not any additional investments therein, and investments in Subsidiaries
expressly permitted under subsection 7.12;
(f) Guaranties in favor of the Bank or in favor of the Agent or the
Senior Lenders pursuant to the Senior Credit Agreement;
(g) deposits for utilities, security deposits under Leases and
similar prepaid expenses incurred in the ordinary course of business;
(h) trade credits arising in the ordinary course of business;
(i) employee advances and loans (excluding the Management Notes)
arising in the ordinary course of business not to exceed $250,000 in the
aggregate outstanding at any one time;
(j) the Management Notes;
(k) Investments outstanding on the Closing Date and described on
Schedule 7.4 hereto;
(l) Investments arising directly under the Specified Transactions;
(m) so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, (i) loans and advances to any
Independent Franchise Affiliate in an aggregate amount not to exceed
$300,000, and (ii) acquisitions of the stock, assets or properties of
Independent Franchise Affiliates in an aggregate amount not to exceed
$1,000,000, provided that such Investments, in each case, shall be deemed
--------
to be Capital Expenditures for purposes of subsection 7.1; provided,
--------
further, that neither the Borrower nor any Subsidiary shall violate
-------
subsection 7.2 or 7.3 as a result of such Investment; and
(n) So long as no Default or Event of Default has occurred and is
continuing or would result therefrom, other Investments (including, without
limitation, Investments in Joint Ventures) in an aggregate amount not to
exceed $500,000 prior to the fifth anniversary of the Closing Date and
$1,000,000 thereafter; provided that such Investments shall be deemed to be
--------
Capital Expenditures for purposes of subsection 7.1; provided, further,
-------- -------
that neither the Borrower nor any Subsidiary shall violate subsection 7.2
or 7.3 as a result of such Investment.
<PAGE>
68
7.5 Merger, Sale of Assets, Dissolution, Etc. Enter into any
----------------------------------------
transaction of merger or consolidation, change its name (except that the
Borrower may change its name to Muzak Limited Partnership), acquire all or a
substantial portion of the assets of any Person, or transfer, sell, assign,
lease, or otherwise dispose of all or any part of its properties or assets, or
any of its notes or Receivables, or permit any Subsidiary to issue or sell any
of its equity interests or any rights, warrants or options to acquire such
equity interests, or wind up, liquidate or dissolve, or agree to do any of the
foregoing, except
(a) sales or other dispositions by the Borrower, any Guarantor or any
Subsidiary thereof of worn out or obsolete property (including motor
vehicles and inventory) in the ordinary course of business, or otherwise no
longer necessary for the proper conduct of business;
(b) the abandonment of any assets and properties of the Borrower or
any Subsidiary thereof which are no longer useful in its business and
cannot be sold;
(c) dissolution of the Special Subsidiaries;
(d) Capital Expenditures permitted pursuant to subsection 7.1;
(e) Investments, acquisitions and intercompany loans permitted
pursuant to subsections 7.3 and 7.4;
(f) purchases of assets not constituting Capital Expenditures in the
ordinary course of business;
(g) transfers, sales, assignments, leases or other dispositions of
assets, notes or Receivables for fair market value, as determined by the
Managing General Partner; provided that (i) the Borrower or the applicable
--------
Subsidiary shall receive at least 75% of such fair market value in cash,
(ii) the Borrower shall not sell or transfer assets to any Subsidiary
except to the extent not prohibited pursuant to subsection 7.12 and (iii)
in the case of any such disposition by a Subsidiary, such Subsidiary shall
have declared and paid a dividend to the Borrower in an amount at least
equal to the proceeds of such disposition;
(h) the sale by the Borrower of all of its assets to a corporation
which has no other assets or liabilities at the time of such sale pursuant
to Section 16.01 of the Partnership Agreement, provided that such
--------
corporation shall have assumed all of the Borrower's obligations under the
Loan Documents pursuant to documentation which takes into account that the
successor to the Borrower is a corporation rather than a partnership, which
shall grant to the Bank substantially the same rights it has pursuant to
the Loan Documents prior to such sale and which shall be in form and
substance reasonably satisfactory to the Bank, provided,
--------
<PAGE>
69
further, that (i) prior to the exercise of any of the options granted
-------
pursuant to the Option Agreement, the Borrower shall have executed and
delivered to the Bank or an Affiliate of the Bank a warrant agreement with
respect to non-voting common stock of such corporation (convertible to
voting shares at the option of any transferee of the Bank or its Affiliate
not subject to regulatory restrictions) in form and substance reasonably
satisfactory to the Bank, which shall grant to the Bank or such Affiliate
substantially the same rights it has pursuant to the Option Agreement and
the Barclays Letter Agreement prior to such sale and (ii) following the
exercise of any of the options granted pursuant to the Option Agreement,
the Bank Partnership Interests shall have been exchanged for shares of
non-voting common stock of such corporation (convertible to voting shares
at the option of any transferee of the Bank not subject to regulatory
restrictions) or other instrument, in form and substance reasonably
satisfactory to the holder or holders of the Bank Partnership Interests,
which shall grant to the holder or holders of the Bank Partnership Interest
substantially the same rights it or they have pursuant to the Partnership
Agreement and the Barclays Letter Agreement prior to such sale;
(i) acts in furtherance of the Specified Transactions;
(j) the dissolution through merger with and into the Borrower of any
Subsidiary;
(k) sales of Inventory in the ordinary course of business; and
(l) the issuance and sale by any Subsidiary of its equity interests,
provided that such Subsidiary shall have declared and paid a dividend to
--------
the Borrower in an amount at least equal to the net proceeds of such sale.
7.6 Dividends, Redemptions and Other Payments. (a) Declare or pay,
-----------------------------------------
or suffer or permit any of its Subsidiaries to declare or pay, any distributions
(including, without limitation, any return of all or part of any capital
contribution or allocation of items of income or gain or any distribution in
respect of any "put option" under the Partnership Agreement) in respect of any
Partnership Interests in the Borrower or any of its Subsidiaries, or declare or
pay any dividends on any shares of capital stock of any class of any of its
Subsidiaries, in any case now or hereafter outstanding, or purchase, redeem,
cancel or acquire any Partnership Interests in the Borrower or any Subsidiary of
the Borrower, or any capital stock of any of its Subsidiaries or any option,
warrant, or other right to acquire such partnership interest or capital stock,
or apply or set apart any of its assets therefor, or make any distribution (by
reduction of capital or otherwise) in respect of any such partnership interest
or shares of capital stock or any such option, warrant or other right, other
than (i) dividends paid or distributed by any Subsidiary of the Borrower to its
direct
<PAGE>
70
parent, (ii) cash payments constituting Distributable Income Taxes, (iii)
distributions in respect of the Specified Transactions, (iv) distributions in
respect of transactions permitted by subsection 7.5(j) and (v) distributions to
the Borrower in respect of the dissolution of the Special Subsidiaries.
(b) Make any payment or prepayment of principal of or interest on, or
purchase, defease, acquire or redeem the Earn-Out Note, the Exchange Notes or
the Torrance Note or make any deposit in respect thereof or give notice in
respect thereof, or suffer or permit any of its Subsidiaries to do so, provided,
--------
however, that so long as no Default or Event of Default is continuing and such
- -------
payment shall not cause a Default or Event of Default to occur, the Borrower may
(i) make regular, scheduled mandatory payment or prepayment of interest when and
as due and payable on the Torrance Note, such payment being approximately in the
amount of $875,000 due on June 1, 1993 and payable on or about January 1, 1994,
(ii) subject to subsection (c) below, make payments with respect to the
Specified Transactions and (iii) make distributions in respect of interest on
the Exchange Notes payable solely in additional Exchange Notes to the holders of
such Exchange Notes.
(c) Make any cash payment in respect of the Earn-Out Payment unless
(i) no Default or Event of Default is continuing and the Earn-Out Payment shall
not cause a Default or Event of Default to occur, (ii) the Borrower has achieved
the EBITDA (as defined in the Purchase Agreement) levels set forth in Section
2.5 of the Purchase Agreement as in existence on the Closing Date, and (iii)
such payment is made on or immediately after the fifth anniversary of the
Closing Date.
(d) Make any cash payment in respect of the Earn-Out Note unless (i)
no Default or Event of Default is continuing and the payment with respect to the
Earn-Out Note shall not cause a Default or Event of Default to occur, (ii) such
payment shall be permitted pursuant to the Earn-Out Note Subordination Agreement
and (iii) such payment is made after the fifth anniversary of the Closing Date.
7.7 Transactions with Affiliates. Except as expressly permitted
----------------------------
under subsection 7.8 or with respect to the Management Option Plan, the FCC
Leases, the Specified Transactions and the Management Notes, enter into or
perform any transaction, including without limitation, the purchase, leasing,
sale or exchange of property or assets or the hiring or rendering of any service
with any Affiliate of the Borrower or any Subsidiary, except for any transaction
which is in the ordinary course of its business, and which transaction is upon
fair and reasonable terms no less favorable to it than it could obtain in a
comparable arm's-length transaction with a Person not an Affiliate of the
Borrower or a Subsidiary.
7.8 Compensation and Fees. Suffer or permit any member of Muzak
---------------------
Management (i) to be employed by Centre Partners,
<PAGE>
71
CCI or any of their Affiliates, directly or indirectly, other than through
employment by the Borrower and any other Credit party, or (ii) as to Messrs.
John Jester and James Harrison only, so long as they are employed by the
Borrower, to devote less than substantially all of their business time to the
business affairs of the Credit Parties. Without limiting the generality of the
foregoing, (x) the Borrower shall provide to the Bank an annual statement
setting forth the aggregate amount of all forms of compensation paid to the five
highest compensated members of Muzak Management (excluding accretion in value
for options previously granted to such Persons) and (y) the Borrower shall not
pay, directly or indirectly, any management, consulting or similar fees to, make
any other payments of any kind to the General Partners or any officers,
directors, or partners of the General Partners or any Affiliate of the Borrower
(except for those Persons who also are members of Muzak Management), provided,
--------
however, the Borrower shall be permitted in all events: (i) subject to
- -------
subsection 7.6, to make payments of Distributable Income Taxes, (ii) to make
payments of directors fees and expenses as provided in Article IX of the
Partnership Agreement, (iii) to make payments with respect to the Specified
Transactions, (iv) to make payment of a $600,000 closing fee payable on the
Closing Date to Centre Partners and (v) to make payments to Affiliates of the
Borrower so long as such payments are permitted pursuant to subsection 7.4(m) or
(n).
7.9 Noncompliance with ERISA. (a) Engage in any transaction in
------------------------
connection with which any Credit Party could be subject to either a material
civil penalty assessed pursuant to the provisions of Section 502(i) of ERISA or
a material tax imposed under the provisions of Section 4975 of the Code;
(b) adopt an amendment, or suffer or permit any other Credit Party to
adopt an amendment, to any Pension Benefit Plan requiring the provision of
security under Section 307 of ERISA or Section 401(a)(29) of the Code;
(c) terminate, or suffer or permit any other Credit Party or any
ERISA Affiliate to terminate, any Pension Benefit Plan under Section 4041(c) of
ERISA;
(d) fail to make any material payment when due of any amounts which,
under the provisions of any Employee Plan or Multiemployer Plan, any Credit
Party or any ERISA Affiliate is required to pay as contributions thereto or as
premiums to the PBGC, with respect to any Pension Benefit Plan, suffer or permit
to exist any material "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA and Section 412 of the Code);
(e) enter into a new agreement that would obligate any Credit Party
or any ERISA Affiliate to make contributions to a Multiemployer Plan which is an
employee pension benefit plan as defined in Section 3(2) of ERISA, other than as
may be required pursuant to the terms of any collective bargaining agreement
which is in effect as of the date hereof or as in effect as of any date in the
future; or
<PAGE>
72
(f) create, extend or increase any obligation to provide health or
medical benefits to retirees (other than at the retiree's own expense) of any
Credit Party other than as may be required pursuant to the terms of any
collective bargaining agreement which is in effect as of the date hereof or at
any date in the future or pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and the regulations thereunder, or any
other applicable federal, state or local law; provided that the Borrower may,
--------
and may permit its Subsidiaries to, provide employer-paid COBRA coverage to
employees terminated pursuant to individual severance arrangements, for a period
not to exceed two years; and, provided, further, that such coverage shall not in
--------
the aggregate result in material liability to the Borrower.
7.10 Amendment and Modification of Purchase Documents and Other
----------------------------------------------------------
Documents. (a) Directly or indirectly, amend, modify, supplement, waive
- ---------
compliance with, seek or grant a waiver under, or assent to noncompliance with,
(i) any term, provision or condition of the Subordinated Indebtedness if the
effect of such amendment is to: (A) increase the interest rate on such
Subordinated Indebtedness; (B) change the dates upon which payments of
principal, interest or dividends are due on such Subordinated Indebtedness; (C)
change any event of default or add any covenant with respect to such
Subordinated Indebtedness; (D) change the redemption or prepayment provisions of
such Subordinated Indebtedness; (E) change the subordination provisions thereof
(or the subordination terms of any guaranty thereof); or (F) change or amend any
other term if such change or amendment would materially increase the obligations
of the obligor or confer additional material rights on the holder of such
Subordinated Indebtedness in a manner adverse to the Borrower, any of its
Subsidiaries or the Bank, or (ii) any material term, provision or condition of
any of the Purchase Documents that materially adversely affects the Bank (in
such capacity only) in the reasonable opinion of the Bank or (iii) any
Management Note in a manner that would have the effect of increasing the
aggregate principal amount of any such Indebtedness to be in excess of $600,000
or extending the final maturity date thereunder, (b) directly or indirectly
amend or modify any term or provision of the Senior Credit Agreement, if the
effect of any such amendment or modification is to increase by more than the
amounts set forth in the definition of "Senior Credit Agreement" the amount of
loans or the commitment for loans and letters of credit under the Senior Credit
Agreement.
7.11 Fiscal Year. Change the Fiscal Year of the Borrower or any of
-----------
its Subsidiaries to other than a December 31st fiscal year.
7.12 Limitation on Formation of Subsidiaries. Form or cause to be
---------------------------------------
formed any Subsidiary without the prior written consent of the Bank (which
consent shall not be unreasonably withheld) other than any Subsidiaries the
Investments in which by the Borrower and its Subsidiaries do not exceed the
amounts set forth in subsection 7.4(n) or (m), as applicable; provided that
--------
<PAGE>
73
the Borrower shall not transfer to any such Subsidiaries any assets primarily
relating to (i) the base music or licensing business of the Borrower or (ii) any
of its twelve divisions for which it acts as licensor or licensee. Without in
any way limiting the provisions of the preceding sentence, in no event shall the
Borrower form or cause to be formed a Subsidiary (other than any Subsidiary the
Investments in which by the Borrower and its Subsidiaries do not exceed the
amounts set forth in subsection 7.4(n) or (m), as applicable) unless and until:
(i) such Subsidiary enters into a Guaranty in accordance with the terms of
subsection 6.18; and (ii) such Subsidiary agrees in writing to be bound by the
covenants set forth in Section 6 and 7.
7.13 Change of Business. Alter in any material respect the nature of
------------------
its business or engage in any business other than the business of on-location
and broadcast business services, which include without limitation, producing,
marketing and distributing programmed music, music video services, data
communications services, video communications services, in store advertising and
promotion services, electronic publication and information distribution
services, related equipment and ancillary communications and related services,
all as engaged in on the Closing Date.
SECTION 8. SUBORDINATION
-------------
8.1 Subordination of Loan to Senior Indebtedness. Each of the
--------------------------------------------
Borrower and the Bank (the use of the term "Bank" in this Section 8 includes
each Purchasing Noteholder and Participant) covenants and agrees that, to the
extent and in the manner hereinafter set forth in this Section 8, the
Indebtedness incurred in connection with the Loan and represented by the Note or
any Guaranty and the payment of the principal or interest and premium, if any,
on the Loan and all other Indebtedness, Obligations and liabilities, now
existing or hereafter created, arising under or in connection with this
Agreement and the Loan Documents, including without limitation, all expenses,
fees, indemnities, interest and other amounts now or hereafter payable hereunder
or thereunder (all of the foregoing, the "Subordinated Obligations") are hereby
------------ -----------
expressly made subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness.
The expression "payment in full" or "paid in full" or any similar
term(s) or phrase(s) when used in this Section 8 with respect to Senior
Indebtedness shall mean the final and indefeasible payment in full of all such
Senior Indebtedness in cash, or, in the case of Senior Indebtedness consisting
of contingent obligations in respect of letters of credit or other reimbursement
obligations under the Senior Loan Documents, the setting apart of cash
sufficient to discharge such portion of Senior Indebtedness in an account for
the exclusive benefit of the holders thereof, in which account such holders
shall be granted by the Borrower a first priority perfected security
<PAGE>
74
interest in a manner acceptable to such holders, which payment or perfected
security interest shall have been retained by the holders of Senior
Indebtedness, in each case, for a period of time in excess of all applicable
preference or other similar periods under applicable bankruptcy, insolvency or
creditors' rights laws.
8.2 Subordination Upon Bankruptcy or Insolvency. In the event of (a)
-------------------------------------------
any insolvency or bankruptcy case or proceeding under the Bankruptcy Code, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, against or with respect to the Borrower or
(b) any liquidation, dissolution or other winding up of the Borrower, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshaling of
assets and liabilities of the Borrower, then and in any such event:
(i) the Senior Debt Holders shall be entitled to receive payment
in full of all amounts due or to become due on or in respect of all Senior
Indebtedness, before the Bank is entitled to receive any payment on account
of the Subordinated Obligations;
(ii) any payment or distribution of any kind or character, whether
in cash, property or securities, by set-off or otherwise, to which the Bank
would be entitled but for the provisions of this Section 8, including any
such payment or distribution which may be payable or deliverable by reason
of the payment of any other Indebtedness of the Borrower being subordinated
to the payment of the Loan, shall be paid or delivered by the liquidating
trustee or agent or other person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating trustee or
otherwise, directly to the agent of the Senior Debt Holders, to the extent
necessary to make payment in full of all Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution to
the Senior Debt Holders; and
(iii) in the event that, notwithstanding the foregoing provisions of
this subsection 8.2, the Bank shall have received any such payment or
distribution of any kind or character, whether in cash, property or
securities, by setoff or otherwise, before all Senior Indebtedness is paid
in full, then and in such event such payment or distribution shall be
deemed to be the property of, segregated, received and held in trust for
the benefit of and shall be immediately paid over or delivered forthwith to
the agent of the Senior Debt Holders for application to the payment of all
Senior Indebtedness remaining unpaid until all such Senior Indebtedness
shall have been paid in full, after giving effect to any concurrent payment
or distribution to the Senior Debt Holders.
<PAGE>
The Borrower shall give prompt notice to the Bank of the occurrence of
any of the events referred to in subsection 8.2(a), (b) or (c); provided,
--------
however, that the failure to deliver such notice shall not affect in any manner
- -------
the rights of the Senior Debt Holders hereunder.
8.3 Subordination Upon Default or Acceleration of Senior
----------------------------------------------------
Indebtedness. (a) In the event of any Event of Default (as defined in the
- ------------
Senior Credit Agreement or other instrument relating to Senior Indebtedness) in
the payment of any Senior Indebtedness or (b) in the event that any Event of
Default (as defined in the Senior Credit Agreement or other instrument relating
to Senior Indebtedness) (other than an event described in clause (a)) with
respect to any Senior Indebtedness shall have occurred and be continuing
permitting the holder of such Senior Indebtedness to declare such Senior
Indebtedness due and payable prior to the date on which it would otherwise have
become due and payable, then no payment of any nature (direct or indirect) shall
be made on account of the Subordinated Obligations (x) in the case of any such
Event of Default described in clause (a), from the date of such Event of Default
until the date, if any, on which the Senior Indebtedness not paid as described
in clause (a) to which such Event of Default relates shall have been paid in
full or the Senior Debt Holders shall have provided notice to the Bank (which
notice shall be delivered promptly) that such Event of Default is cured or
waived by the appropriate Senior Debt Holders; or (y) in the case of such Event
of Default described in clause (b), from the date the Borrower first received
written notice of such Event of Default from the Senior Debt Holders or their
agent until the earlier of (1) 180 days after such date, and (2) the date, if
any, on which the Senior Indebtedness to which such Event of Default relates
shall have ceased to exist or the Senior Debt Holders shall have provided notice
to the Bank (which notice shall be delivered promptly) that such Event of
Default is cured or waived by the appropriate Senior Debt Holders; provided,
--------
however, that (I) further written notice relating to the same or any other Event
- -------
of Default specified in clause (b) above with respect to any Senior Indebtedness
received by the Borrower within one (1) year after receipt of the initial such
written notice shall not be effective for the purposes of this sentence and (II)
that no more than an aggregate of seven (7) written notices may be given
pursuant to this subsection 8.3 with respect to an Event of Default described in
clause (b) above during the period from the date hereof to and including the
date the Note has been paid in full. Any notice given by the Senior Debt Holders
to the Borrower pursuant to this subsection 8.3 shall specify in reasonable
detail the Event of Default which is continuing and the basis upon which such
notice is being given, shall state that no amounts shall be payable by the
Borrower in respect of the Subordinated Obligations in accordance with this
subsection 8.3 and shall specify that this notice serves as notice to the
holders of the Subordinated Indebtedness under this Section 8.3. The Borrower,
forthwith upon receipt of any such notice, shall send copies thereof to the
Bank.
<PAGE>
76
In the event that, notwithstanding the foregoing, the Borrower shall
make any payment to the Bank prohibited by the foregoing provisions of this
subsection 8.3, then and in such event such payment shall be deemed to be the
property of, segregated, received and held in trust for the benefit of and shall
be immediately paid over and delivered forthwith to the Senior Debt Holders or
their representative, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held or represented by them for
application against the Senior Indebtedness until such Senior Indebtedness is
paid in full.
Notwithstanding the foregoing, if any holder of Senior Indebtedness
shall declare Senior Indebtedness due and payable before the expressed maturity
of such Senior Indebtedness, then no direct or indirect payment (in cash,
property, by set-off or otherwise) shall be made on account of any indebtedness
in respect of the Subordinated Obligations unless and until (A) such
acceleration shall have been revoked or rescinded or (B) such Senior
Indebtedness shall be paid in full.
The provisions of this subsection 8.3 shall not apply to any payment
with respect to which subsection 8.2 would be applicable.
8.4 Bank's Rights and Remedies. Nothing contained in Section 8 or
--------------------------
elsewhere in this Agreement or in the Note shall, at any time except during the
pendency of any case or proceeding of the Borrower referred to in subsection 8.2
or under the conditions described in subsection 8.3, affect the obligation of
the Borrower to make, or prevent the Borrower from making, payments at any time
(except as limited pursuant to the last sentence of subsection 3.2) of principal
of or interest or premium, if any, on the Loan or any fees or other amounts
payable by the Borrower under this Agreement or the Note or prevent the Bank
from exercising all remedies otherwise permitted by this Agreement, the Note or
applicable law upon default under this Agreement or the Note, subject to the
rights, if any and if permitted pursuant to subsection 3.2, under this Section 8
of the Senior Debt Holders (1) in any case or proceeding of the Borrower
referred to in subsection 8.2, to receive, pursuant to and in accordance with
such subsection, cash, property and securities otherwise payable or deliverable
to such holder, or (2) under the conditions specified in subsection 8.3, to
prevent (or receive) any payment prohibited by such subsection.
With respect to the Senior Indebtedness, the Bank undertakes to
perform only such obligations on the part of the Bank as are specifically set
forth in this Section 8, and no implied covenants or obligations with respect to
the Senior Debt Holders shall be read into this Section 8 against the Bank.
8.5 Subrogation to Rights of Senior Debt Holders. Subject to the
--------------------------------------------
payment in full of all Senior Indebtedness, the Bank shall be subrogated to the
rights of the Senior Debt Holders to receive payments and distributions of cash,
property and
<PAGE>
77
securities applicable to the Senior Indebtedness until the principal of and
interest and premium, if any, on the Loan and any fees or other amounts payable
by the Borrower under this Agreement or the Note shall be paid in full. For
purposes of such subrogation, no payments or distributions to the Senior Debt
Holders of any cash, property or securities to which the Bank would be entitled
except for the provisions of this Section 8, and no payments over pursuant to
the provisions of this Section 8 to the Senior Debt Holders by the Bank, shall,
as among the Borrower, its creditors other than Senior Debt Holders, and the
Bank, be deemed to be a payment or distribution by the Borrower to or on account
of the Senior Indebtedness.
8.6 No Waiver of Subordination Provisions. No right of any present
-------------------------------------
or future Senior Debt Holder to enforce subordination as herein provided shall
at any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Borrower, or by any non-compliance by the Borrower with the
terms, provisions and covenants of this Agreement or the Note, regardless of any
knowledge thereof any such Holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the Senior Debt Holders may, at any time and from time to time, without the
consent of or notice to the Bank, without incurring responsibility to the Bank
and without impairing or releasing the subordination provided in Section 8 or
the obligations hereunder of the Bank to the Senior Debt Holders, do any one or
more of the following: (a) change the manner, place or terms of payment or
extend the time of payment of, or renew, amend, modify, or alter, any Senior
Indebtedness or any instrument evidencing the same or any agreement evidencing,
governing, creating, guaranteeing or securing any Senior Indebtedness; provided,
--------
however, that the provisions of this Section 8 are limited to Indebtedness which
- -------
constitutes Senior Indebtedness; (b) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing Senior Indebtedness;
(c) release any Person liable in any manner for the collection of Senior
Indebtedness; (d) fail or delay in the perfection of Liens securing the Senior
Indebtedness, and (e) exercise or refrain from exercising any rights against the
Borrower and any other Person.
8.7 Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of the Borrower referred to in this
Section 8, the Bank shall be entitled to rely upon any order or decree by any
court of competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution, winding up or similar
case or proceeding is pending, delivered to the Bank, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other Indebtedness of the
Borrower, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Section 8.
<PAGE>
78
8.8 Bank Entitled to Assume Payments Not Prohibited in Absence of
-------------------------------------------------------------
Notice. The Bank shall not at any time be charged with knowledge of the
- ------
existence of any facts which would prohibit the making of any payment to it,
unless and until the Bank shall have received written notice thereof at its
principal office (or such other address which shall have been given in writing
to all Senior Debt Holders and the Borrower) from the Borrower or from one or
more Senior Debt Holders or from any representative or representatives thereof;
and prior to the receipt of any such written notice the Bank shall be entitled
to assume conclusively that no such facts exist, without, however, limiting any
such rights of Senior Debt Holders under this Section 8 to recover from the
Bank, or the obligation of the Bank to turn over to the Senior Debt Holders, any
payment made to the Bank which the Bank is not entitled under this Section 8 to
retain.
The Bank shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself to be Senior Debt Holder to establish
that such notice has been given by a Senior Debt Holder. In the event that the
Bank determines in good faith that further evidence is required with respect to
the right of any Person as a Senior Debt Holder to participate in any payment or
distribution pursuant to this Section 8, the Bank may request such Person to
furnish evidence to the reasonable satisfaction of the Bank as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under Section 8, and if such evidence is
not furnished the Bank may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
8.9 Information as to Subordination. The Borrower will not, and will
-------------------------------
not permit any of its Subsidiaries or agents to, publish or give to any creditor
or prospective creditor of the Borrower or any of its Subsidiaries any copy,
statement or summary (or acquiesce in the publication or giving of any such
copy, statement or summary) as to the subordination of the rights of the Bank
without also stating, or causing to be stated (in a conspicuous manner in the
case of any document) that such subordination is solely for the benefit of the
Senior Debt Holders and not for the benefit of any other creditor of the
Borrower or any of its Subsidiaries.
8.10 Effect of Failure to Pay Loan. The fact that failure to make a
-----------------------------
payment on account of principal of or interest or premium, if any, on the Loan
by reason of any provision of this Section 8 shall not be construed as
preventing the occurrence of a Default or Event of Default under this Agreement.
8.11 Reliance. The Bank by its making of the Loan acknowledges and
--------
agrees that the provisions of Section 8 are, and are intended to be, an
inducement and a consideration to each Senior Debt Holder, whether the Senior
Indebtedness was created or acquired before or after the issuance of the Note,
to acquire and/or continue to hold such Senior Indebtedness and such Senior
<PAGE>
79
Debt Holder shall be deemed conclusively to have relied on the provisions of
this Section 8 in acquiring and/or continuing to hold such Senior Indebtedness.
8.12 Amendments. Without the prior written consent of the Senior
----------
Lenders (a) the Borrower may not enter into written amendments, supplements or
modifications to the provisions of this Section 8, and (b) the Bank may not
execute and deliver to the Borrower any written instrument waiving any of the
requirements of this Section 8.
SECTION 9. EVENTS OF DEFAULT
-----------------
Upon the occurrence of any of the following events:
(a) failure by the Borrower to pay any principal of the Loan or any
premium thereon when due, or failure by such Borrower to pay any interest
on the Loan or to pay any fee or other amount payable hereunder within 15
days after the date when due; or
(b) any representation or warranty made by any Credit Party in this
Agreement or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished at any time
under or in connection herewith or therewith or in the Purchase Documents
shall prove to have been incorrect, false or misleading in any material
respect on or as of the date when made; or
(c) any default by the Borrower in the observance or performance of
any covenant or agreement contained in subsection 6.1(g), 6.17, 7.1, 7.3,
7.5, 7.6, 7.10, 7.11 or 7.12; or
(d) any default by the Borrower in the observance or performance of
any covenant or agreement contained in subsection 6.1(a), 6.1(b), 6.1(c),
6.1(f), 7.4, 7.7, 7.8, 7.9 or 7.13 and the continuance of such default
shall remain unremedied for a period of 15 days; or
(e) any default by the Borrower in the observance or performance of
any other covenant or agreement contained in this Agreement (other than as
specified in clauses (a) through (d)) and the continuance of such default
shall remain unremedied for a period of 30 days after the Bank shall have
given notice thereof to the Borrower or the Borrower shall have given
notice thereof to the Bank pursuant to subsection 6.9; or
(f) the Borrower or any Subsidiary shall after giving effect to any
grace period provided therein, default in the observance or performance of
any agreement or condition relating to any Indebtedness for Borrowed Money
(other than any such default in respect of the Loan or the Senior
<PAGE>
80
Indebtedness) or in the payment of any Contingent Obligation which has
become due and payable in respect of any such Indebtedness of any other
Person or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, in any
such case the effect of which default or other event or condition is to
cause such Indebtedness to become due (pursuant to notice from the holders
of such notice, if required pursuant to such Indebtedness) prior to its
stated maturity or such Contingent Obligation to become payable in an
aggregate amount for such Indebtedness and Contingent Obligations of
$1,000,000 or more, or the Borrower or any Credit Party shall default in
the payment of any such Indebtedness or Contingent Obligation at the final
maturity thereof; or
(g) the holder or holders of any Senior Indebtedness (or a trustee or
agent on behalf of such holder or holders) shall cause, with the giving of
notice if required, any of the Senior Indebtedness to become due prior to
its stated maturity; or
(h) (i) any Credit Party shall (A) be unable to pay its debts
generally as they become due; (B) file a petition to take advantage of any
insolvency act; ((C) make an assignment for the benefit of its creditors;
(D) commence a proceeding for the appointment of a receiver, trustee,
liquidator or conservator of itself or of a whole or any substantial part
of its property; (E) file a petition or answer seeking reorganization or
arrangement or similar relief under the Federal Bankruptcy Code or any
other applicable law or statute of the United States of America or any
state; or (F) by appropriate proceedings of the board of directors, or the
general or limited partners or other governing body of any Credit Party,
authorize the filing of any such petition, making of such assignment or
commencement of such a proceeding; or (ii) a court of competent
jurisdiction shall enter an order, judgment or decree appointing a
custodian, receiver, trustee, liquidator or conservator of any Credit Party
or of the whole or any substantial part of its properties, or approve a
petition filed against any Credit Party seeking reorganization or
arrangement or similar relief under the Federal Bankruptcy Code or any
other applicable law or statute of the United States of America or any
state; or if, under the provisions of any other law for the relief or aid
of debtors, a court of competent jurisdiction shall assume custody or
control of any Credit Party or of the whole or any substantial part of its
properties; or if there is commenced against any Credit Party any
proceeding for any of the foregoing relief and such proceeding or petition
remains undismissed for a period of sixty days; or if any Credit Party by
any act indicates its consent to or approval of any such proceeding or
petition; or
<PAGE>
81
(i)(i) a Reportable Event shall have occurred with respect to a
Pension Benefit Plan;
(ii) any Credit Party or any ERISA Affiliate, or an administrator of
any Pension Benefit Plan shall have filed a notice of intent to terminate a
Pension Benefit Plan in a "distress termination" under the provisions of
Section 4041(c) of ERISA;
(iii) any Credit Party or any ERISA Affiliate, or an administrator of a
Pension Benefit Plan shall have received a notice that the PBGC has
instituted proceedings to terminate (or appoint a trustee to administer) a
Pension Benefit Plan;
(iv) any Credit Party or any ERISA Affiliate has incurred, or is
likely to incur, a material liability under the provisions of Sections
4041(c), 4062, 4063, 4064 or 4201 of ERISA;
(v) any Person shall engage in any transaction in connection with
which any Credit Party could be subject to either a material civil penalty
assessed pursuant to the provisions of Section 502(i) of ERISA or a
material tax imposed under the provisions of Section 4975 of the Code; or
(vi) the Borrower, any Credit Party or any ERISA Affiliate fails to
pay the full amount of any installment due under Section 412(n) of the Code
such that a Lien could arise under Section 412(m) of the Code;
and in each case in clauses (i) through (vi) above, in the reasonable opinion of
the Bank, such event or condition, together with all other events or conditions,
if any, could subject the Borrower to any tax, penalty or other liabilities
which in the aggregate would be material in relation to the business,
operations, liabilities, assets, properties, prospects or condition (financial
or otherwise) of the Borrower;
(j) a Transfer Event shall occur; or
(k) any judgment remaining unpaid, unstayed, undismissed, unbonded or
otherwise undischarged for a period of 30 days is entered against any
Credit Party which by itself or together with all other such judgments
rendered against such Credit Party remaining unpaid, unstayed, undismissed,
unbonded or otherwise undischarged for a period of 30 days, involves in the
aggregate a liability not covered by insurance of (w) during the first
three years following the Closing Date, $250,000 or more, (x) during the
fourth through sixth year following the Closing Date, $500,000 or more or
(z) thereafter, $750,000 or more or (ii) there is any attachment,
injunction or execution against any of its properties remaining unstayed or
undismissed for a period of 30 days which by itself or together with all
other attachments, injunctions and executions against its
<PAGE>
82
properties remaining unstayed or undismissed for a period of 30 days
involves in the aggregate a liability not covered by insurance of (w)
during the first three years following the Closing Date, $250,000 or more,
(x) during the fourth through sixth year following the Closing Date,
$500,000 or more or (z) thereafter, $750,000 or more; or
(l) following September 4, 2000, (i) Indebtedness pursuant to term
loans under the Senior Credit Agreement exceeds $15,000,000 in the
aggregate or (ii) Indebtedness pursuant to revolving credit loans incurred
or permitted to be incurred (the "Permitted Revolving Credit Commitments")
under the Senior Credit Agreement exceeds $8,000,000, provided that such
--------
Permitted Revolving Credit Commitments may be increased during such period
at the option of the Borrower by an aggregate amount not exceeding
$5,000,000 so long as the term loans under the Senior Credit Agreement are
reduced for such period by an amount equal to such increase in the
Permitted Revolving Credit Commitments;
then, and in any such event, (x) if such event is an Event of Default specified
in paragraph (h) of this Section 9, the Loan hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement shall immediately
become due and payable, and (y) if such event is any other Event of Default, the
Bank may, so long as such Event of Default is continuing, declare the Loan (with
accrued interest thereon) and all other amounts owing under this Agreement to be
due and payable forthwith, whereupon the same shall immediately become due and
payable.
In the event of a declaration of acceleration in respect of the Note
because an Event of Default specified in Section 9(g) shall have occurred and be
continuing, such declaration of acceleration shall be automatically annulled if
the appropriate holders of the Senior Indebtedness have rescinded their
declaration of acceleration in respect of such Indebtedness, and written notice
of such discharge, cure or rescission, as the case may be, shall have been given
to the Bank by the Borrower or by one or more of the holders of such
Indebtedness or a trustee, fiduciary or agent for such holders and no other
Event of Default has occurred since such declaration of acceleration in respect
of the Note which has not been cured or waived.
Except as expressly provided above in this Section 9, presentment,
demand, protest and all other notices of any kind are hereby expressly waived to
the extent permitted by law.
SECTION 10. MISCELLANEOUS
-------------
10.1 Amendments and Waivers. Subject to subsection 8.12, with the
----------------------
written consent of the Bank, the Borrower may, from time to time, enter into
written amendments, supplements or modifications thereto for the purpose of
adding any provisions to this Agreement or the other Loan Documents or
<PAGE>
83
changing in any manner the rights of the Bank, or of the Borrower hereunder or
thereunder, and the Bank may execute and deliver to the Borrower a written
instrument waiving, on such terms and conditions as the Bank may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances. Any assignment, delegation or sale of rights,
obligations, or any other interest herein or in the Note pursuant to the terms
of subsection 10.6 shall not be considered an amendment, supplement,
modification or waiver of any provision hereof or of the other Loan Documents.
Any amendment, supplement, modification or waiver made or granted pursuant
hereto shall be binding upon the parties hereto and to all future holders of the
Note. In the case of any waiver, the parties hereto shall be restored to their
former position and rights hereunder and under the outstanding Note, and any
Default or Event of Default waived shall be deemed to be cured as of the date of
the occurrence of such Default or Event of Default and not continuing through
the effective date of such waiver; but, no such waiver shall extend to the
continuation of such Default or Event of Default beyond the effective date of
such waiver nor shall such waiver extend to any subsequent or other Default or
Event of Default, or impair any right consequent thereon.
10.2 Notices. All notices, consents, requests and demands to or upon
-------
the respective parties hereto to be effective shall be in writing or by
telecopier and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand or by overnight courier, or
when deposited in the mail, certified mail, return receipt requested, postage
prepaid, three (3) days after being so deposited or, in the case of telecopy
notice and acknowledged, when sent, addressed as follows to the Borrower and the
Bank, or to such address or other address as may be hereafter notified in
writing by any of the respective parties hereto or any future holders of the
Note:
The Borrower: MLP Operating, L.P.
c/o Centre Partners L.P.
One Rockefeller Plaza
New York, NY 10020
Attention: Mr. Lester Pollack
Telecopier: (212) 632-4846
Telephone: (212) 632-4829
With a copy to: Muzak Limited Partnership
400 North 34th Street
Suite 200
Seattle, Washington 98103
Attention: Mr. John R. Jester
Telecopier: (206) 633-6210
Telephone: (206) 633-3000
<PAGE>
84
With a copy to: Rosenman & Colin
575 Madison Avenue
New York, NY 10022
Attention: Mr. Michael Roth
Telecopier: (212) 940-8776
Telephone: (212) 940-8800
The Bank: Barclays Bank PLC
222 Broadway
New York, New York 10038
Attention: Patrick N.W. Turner
Telecopier: (212) 412-6780
Telephone: (212) 412-6777
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Bank, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
10.4 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Note, and shall terminate when all
amounts outstanding under the Note and all other amounts payable hereunder have
been paid in full; provided that obligations in respect of indemnifications
--------
hereunder shall survive the repayment of amounts outstanding hereunder and under
the Note.
10.5 Payment of Expenses and Taxes; Indemnification. The Borrower
----------------------------------------------
agrees (a) to pay or reimburse the Bank for all its reasonable out-of-pocket
costs and expenses incurred in connection with the preparation, execution and
delivery of, and any amendment, supplement, waiver or modification to, this
Agreement, the Note, the other Loan Documents and any documents prepared in
connection herewith or therewith, and the consummation of the transactions and
the enforcement of any rights contemplated hereby and thereby, including,
without limitation, (i) the reasonable fees and disbursements of its outside
counsel, whether or not the transactions herein contemplated are consummated,
and (ii) reasonable domestic travel and other expenses incurred by the Bank in
connection with attending meetings permitted pursuant to subsection 6.16), (b)
to pay, indemnify, and to hold the Bank and its Affiliates, directors, officers,
employees, attorneys and agents thereof harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay by the Borrower or any party to any of the Related Transaction Documents
in paying, stamp, excise and other similar taxes, it being understood that in no
event shall these taxes be deemed to
<PAGE>
85
include (x) taxes payable by withholding, if any, or (y) franchise taxes and
taxes upon or determined by reference to net income, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the Note and the other Loan Documents, and (c) to pay,
indemnify, and hold the Bank and Affiliates, directors, officers, employees,
attorneys and agents thereof harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement, the Note, the other Loan Documents and the Related Transaction
Documents, arising because of claims of Third Parties (all of the foregoing,
collectively, the "indemnified liabilities"), provided that the Borrower shall
----------------------- --------
have no obligation hereunder with respect to (x) indemnified liabilities arising
from (i) the gross negligence, bad faith or willful misconduct of the Bank, (ii)
a breach by the Bank of any covenant or agreement contained in any Loan
Document, (iii) any violation by the Bank of any law or regulation applicable to
the Bank (except to the extent that such violation is attributable to any breach
by or on behalf of the Seller, the Borrower or any Subsidiary of any
representation, warranty or agreement contained in any Related Transaction
Document, in each case, as determined by a final nonappealable decision of a
court of competent jurisdiction) or (iv) legal proceedings commenced against the
Bank by any security holder or creditor thereof arising out of and based upon
rights afforded any such security holder or creditor solely in its capacity as
such or (y) losses, liabilities or obligations of the Bank arising out of the
Option Agreement, Indemnity Agreement, Barclays Letter Agreement or Partnership
Agreement. The agreements in this subsection shall survive repayment of the Note
and all other amounts payable hereunder.
10.6 Successors and Assigns. (a) This Agreement shall be binding
----------------------
upon and inure to the benefit of the Borrower, the Bank, all future holders of
the Note and their respective successors and assigns, except that the Borrower
may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of the Bank.
(b) The Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in the Loan,
------------
the Note or any other amount payable to the Bank hereunder. In the event of any
such sale by the Bank of participating interests to a Participant, (x) the
Bank's obligations under this Agreement shall remain unchanged, the Bank shall
remain solely responsible for the performance thereof, the Bank shall remain the
holder of the Note for all purposes under this Agreement, and the Borrower shall
continue to deal solely and directly with the Bank in
<PAGE>
86
connection with the Bank's rights and obligations under this Agreement and (y)
the Bank shall be fully responsible (without recourse to the Borrower) for any
present or future withholding or other taxes, duties or charges of any nature
imposed on any payments or prepayments to be made to a Participant.
(c) The Bank may, upon prior written notice to the Borrower, in the
ordinary course of its commercial banking business and in accordance with
applicable law, at any time assign to one or more banks or trust companies
organized under the laws of the United States of America or any State thereof
having a combined capital and surplus of not less than $100,000,000 or other
financial institution, in each case, reasonably acceptable to the Borrower
(individually a "Purchasing Noteholder" and collectively "Purchasing
--------------------- ----------
Noteholders") any part of its rights and obligations under this Agreement and
- -----------
the Note; provided that, after giving effect thereto, Barclays Bank PLC shall
retain at least 50% of the outstanding principal amount of the Loan. Upon such
sale, (x) the Purchasing Noteholder shall be a party hereto and have the rights
and obligations of the Bank hereunder based on the percentage of the outstanding
principal amount of the Loan owing hereunder purchased by such Purchasing
Noteholder and (y) the Purchasing Noteholder shall appoint Barclays Bank PLC as
agent hereunder pursuant to an agreement in form and substance satisfactory to
the Purchasing Noteholder, the transferrer Bank and the Borrower. Such
assignment shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Noteholder as
party hereto. On or prior to the date of such assignment, the Borrower, at its
own expense, shall execute and deliver to the Purchasing Noteholder in exchange
for the surrendered Note a new Note to the order of such Purchasing Noteholder
in an amount equal to the percentage of the outstanding principal amount of the
Loan owing hereunder assumed by it pursuant to such assignment and a new Note to
the order of the transferrer Bank in an amount equal to the amount retained by
it hereunder. Such new Notes shall be dated the Closing Date and shall otherwise
be in the form of the Note replaced thereby. The Note surrendered by the
transferrer Bank to the Borrower shall be marked "cancelled."
(d) The Bank shall maintain at its address referred to in subsection
10.2 a register (the "Register") for the recordation of the names and addresses
--------
of the Purchasing Noteholders and the percentage of, and principal amount of the
Loan owing to, each Purchasing Noteholder from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the Borrower
and the Bank may treat each Person whose name is recorded in the Register as the
owner of the Note recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Purchasing
Noteholder at any reasonable time and from time to time upon reasonable prior
notice.
<PAGE>
87
(e) Upon the assignment of a portion of the Loan pursuant to this
subsection 10.6, the Bank shall promptly record such assignment in the Register
and give notice of such recordation to the Purchasing Noteholders, the Borrower
and the Senior Lenders.
(f) The Borrower authorizes the Bank or any Purchasing Noteholder to
disclose to any Participant, prospective Participant, Purchasing Noteholder, any
prospective Purchasing Noteholder or any court, regulatory body or agency having
jurisdiction over such Bank or Purchasing Noteholder any and all financial
information in such Bank's or Purchasing Noteholder's possession concerning the
Borrower and its Affiliates which has been delivered to such Bank or Purchasing
Noteholder by or behalf of the Borrower pursuant to this Agreement or which has
been delivered to such Bank or Purchasing Noteholder by or on behalf of the
Borrower in connection with such Bank's or Purchasing Noteholder's credit
evaluation of the Borrower and its Affiliates prior to becoming a party to this
Agreement; provided, however, that prior to any disclosure to a Participant,
-------- -------
prospective Participant, Purchasing Noteholder or any prospective Purchasing
Noteholder, such Bank or Purchasing Noteholder, as the case may be, shall cause
each Participant, prospective Participant, Purchasing Noteholder or prospective
Purchasing Noteholder to agree in writing to treat such information
confidentially and to abide by the provisions of this paragraph (f).
(g) Each of the Bank or a Participant or a Purchasing Noteholder
organized under the laws of a jurisdiction outside of the United States (a
"Foreign Lender") shall provide to the Borrower two properly completed and
- ---------------
executed Internal Revenue Service Forms 4224 or Forms 1001 or other applicable
forms, certificates or documents prescribed by the United States Internal
Revenue Service certifying as to such Foreign Lender's entitlement to complete
exemption from United States withholding tax under an applicable statute or tax
treaty with respect to payments to be made to such Foreign Lender (directly or
indirectly) under this Agreement or under the Note ("Certificates of
------------ --
Exemption"). Each Foreign Lender shall provide such Certificates of Exemption
- ---------
on or before the Closing Date (or in the case of a Participant or a Purchasing
Noteholder, on or before the date such Foreign Lender becomes a Participant or
Purchasing Noteholder) and on or before the first business day of each taxable
year of such foreign lender thereafter. Each Foreign Lender further agrees to
provide the Borrower with new Certificates of Exemption (x) upon the
obsolescence of any form, certificate or document previously delivered by the
Foreign Lender to the Borrower hereunder or (y) promptly after the occurrence of
any event requiring a change in the exempt status of the Foreign Lender or in
any of the other information provided on the most recent form, certificate or
document previously delivered by the Foreign Lender to the Borrower hereunder.
10.7 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall,
<PAGE>
88
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
10.8 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be delivered to and held by the Bank and the Borrower.
10.9 SUBMISSION TO JURISDICTION. THE BORROWER AND THE BANK EACH
--------------------------
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
BARCLAYS PARTNERSHIP DOCUMENT TO WHICH IT IS A PARTY, OR FOR RECOGNITION
AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE
GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF
THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE
COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVES TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT
COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL
(OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO IT AT ITS
ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE
BANK SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AND
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT TO SUE IN ANY OTHER JURISDICTION.
10.10 GOVERNING LAW. THIS AGREEMENT AND THE NOTE AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
10.11 Third Party Rights. This Agreement is solely for the benefit
------------------
of the parties hereto and, where applicable, the Senior Debt Holders and their
respective successors and assigns as permitted hereunder, and no other Person
shall have any right, benefit, priority or interest under, or because of the
existence
<PAGE>
89
of, this Agreement. The Senior Debt Holders are intended third party
beneficiaries of Section 8 of this Agreement and may enforce their rights with
respect thereto directly against the parties hereto.
10.12 Entire Agreement. This Agreement, together with the other
----------------
documents and agreements referenced herein to be executed by the parties in
connection herewith or that otherwise are executed by the parties concurrently
herewith, constitutes the entire agreement of the parties with respect to the
subject matter hereof, and supersedes any prior agreements or understandings,
whether written or oral.
10.13 Disclosure of Financial Information. Subject to the terms of
-----------------------------------
subsection 10.14, the Bank is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business,
operations or financial condition of the Borrower and each of its Subsidiaries
which may be furnished to it hereunder or otherwise, to any court, Governmental
Body having jurisdiction over the Bank, to any Person which shall, or shall have
any right or obligation to, succeed to all or any part of the Bank's interests
in the Loan, this Agreement or any other Loan Document or Barclays Partnership
Document or, subject to the provisions of subsection 10.6(f), to any actual or
prospective participant therein or assignee thereof.
10.14 Maintenance of Confidentiality. The Bank shall hold all non-
------------------------------
public, proprietary or confidential information obtained pursuant to or in
connection with the transactions contemplated by the Loan Documents or the
Barclays Partnership Documents (the "Confidential Information") in confidence
------------------------
and shall not use or disclose any such Confidential Information except for
purposes of the transactions contemplated by and in accordance with the Loan
Documents and the Barclays Partnership Documents; provided, however, that the
-------- -------
Bank may disclose any such Confidential Information (i) its examiners, outside
auditors, counsel, consultants, appraisers and other professional advisors in
connection with the transactions contemplated by the Loan Documents or the
Barclays Partnership Documents, (ii) as required by any Governmental Body or
(iii) to any proposed syndicate member or any proposed assignee or participant
in connection with the contemplated transfer, in accordance with subsection
10.6, of any Note or participation therein, provided that any such Person shall
execute a confidentiality agreement containing provisions substantially
identical to this subsection 10.14. Notwithstanding the foregoing, the
provisions of this subsection 10.14 shall not apply to such portions of the
Confidential Information that (i) are or become available to the public through
no fault or action of the Bank or its representatives, or (ii) become available
to the Bank or its representatives on a non-confidential basis from a source,
other than the Borrower or its representatives, not thereby violating any
agreement with or other duty to the Borrower.
<PAGE>
90
10.15 Non-Recourse to Partners. The Obligations are non-recourse to
------------------------
the Partners in their respective capacities as Partners. No Partner nor any
legal representative, heir, estate, successor or assign of any such Partner or
any officer, director, shareholder or partner in any such Partner or Partners,
whether disclosed or undisclosed, in each case solely in their respective
capacities as such, shall have any personal liability under the Loan Documents
or the Barclays Partnership Documents for (i) the payment of any sum of money
which is or may be payable under the Loan Documents or the Barclays Partnership
Documents, including, but not limited to, the repayment of the Loan or (ii) the
performance or discharge of any covenant or undertakings of any Credit Party
under the Loan Documents or the Barclays Partnership Documents; provided,
--------
however, that the foregoing shall not in any way affect the validity or
- -------
enforceability of any of the Loan Documents or Barclays Partnership Documents
against the Credit Parties being party thereto or exonerate any Partner in
respect of its receipt of distributions made in contravention of this Agreement,
the Partnership Agreement, any Barclays Partnership Document or any other
agreement governing any Credit Party.
10.16 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE BANK HEREBY
--------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING REFERRED TO IN PARAGRAPH (a) ABOVE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
MLP OPERATING, L.P.
By: MLP ACQUISITION, L.P.,
its Managing General Partner
By: MUSIC HOLDINGS CORP.,
its General Partner
By: /s/ Mark E. Jennings
--------------------------------
Title: V.P
BARCLAYS BANK PLC, NEW YORK BRANCH
By: [SIGNATURE ILLEGIBLE]
----------------------------------------
Title: Director
<PAGE>
Exhibit 10.6
<PAGE>
OPTION AGREEMENT, dated as of September 4, 1992 (as amended,
supplemented or otherwise modified from time to time, the "Agreement"),
---------
between MLP OPERATING, L.P., a Delaware limited partnership (to be known as
Muzak Limited Partnership) ("Muzak") and BARCLAYS BANK PLC, NEW YORK BRANCH
-----
("Barclays").
--------
R E C I T A L S
---------------
WHEREAS, Barclays and Muzak are parties to a Subordinated Loan
Agreement, dated as of September 4, 1992 (as amended, supplemented or otherwise
modified from time to time, the "Subordinated Loan Agreement"; terms defined
---------------------------
therein are used herein with their defined meanings); and
WHEREAS, it is a condition to the making of the Loan under the
Subordinated Loan Agreement that Barclays and Muzak shall have entered into this
Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Option to Acquire. Upon two business days' prior written notice
-----------------
to Muzak and the payment of $10.00 to Muzak, Barclays may require Muzak to, and
Muzak hereby unconditionally agrees that upon receipt of such notice it will,
issue to Barclays and in Barclays' name (or in the name of any Affiliate of
Barclays designated by Barclays in such notice who is a permitted transferee
pursuant to Section 6 hereof), 977,089 Class A-2 Limited Partnership Units of
Muzak (the "Put/Call Units").
2. Option to Put. Upon two business days' prior written notice to
-------------
Barclays, Muzak may require Barclays to, and Barclays hereby unconditionally
agrees that upon receipt of such notice it will, pay $10.00 to Muzak and accept
the issuance to Barclays in Barclays' name (or, in Barclays' sole discretion, in
the name of any Affiliate of Barclays designated by Barclays to Muzak in writing
upon receipt of such notice who is a permitted transferee pursuant to Section 6
hereof), of the Put/Call Units.
3. Tax Treatment. Barclays and Muzak hereby agree that (a)
-------------
Barclays shall be treated as the taxpayer with respect to the Units and
accordingly, shall take into account the income and loss of Muzak as provided in
Article VI of the Partnership Agreement with respect to such Put/Call Units, (b)
Muzak shall issue to Barclays an Internal Revenue Service Schedule K-1 with
respect to the Put/Call Units for each taxable year of Muzak during the term
hereof and (c) Muzak and Barclays shall each be bound by the provisions of
Articles V, VI and X and Section 17.02 of the Partnership Agreement with respect
to the Put/Call Units.
4. Payments. Barclays and Muzak hereby agree that Muzak shall make
--------
payments to Barclays in respect of the Put/Call
<PAGE>
2
Units in accordance with Section 6.05 of the Partnership Agreement, as
originally in effect.
5. Adjustments. In the event that a distribution shall be declared
-----------
on theClass A-2 Limited Partner Interests payable in Units of the Class A-2
Limited Partner Interests, the number of Put/Call Units then subject to any
option pursuant to Section 1 or 2 hereof shall be adjusted by adding to the
number of Put/Call Units the number of Units of Class A-2 Limited Partner
Interests which would be distributable thereon if such Put/Call Units had been
outstanding on the date fixed for determining the Limited Partners entitled to
receive such Class A-2 Limited Partner Interests. In the event of a forward or
reverse split-up of the Class A-2 Limited Partner Interests, there shall be
substituted for each Put/Call Unit of the Class A-2 Limited Partner Interests
then subject to any option pursuant to Section 1 or 2 hereof the number of Units
of Class A-2 Limited Partner Interests into which each outstanding unit of Class
A-2 Limited Partner Interest shall be so changed. In the event that there shall
be any change, other than as specified in this Section 5, in the number or kind
of outstanding Units of the Class A-2 Limited Partner Interest, or other
securities into which the Class A-2 Limited Partner Interests shall have been
changed, or for which they shall have been exchanged, and a corresponding and
equivalent change shall have been made in the number or kind of outstanding
Units of the Class A-1 Limited Partner Interest, or other securities into which
the Class A-1 Limited Partner Interests shall have been changed, or for which
they shall have been exchanged, then, if the Managing General Partner shall, in
the reasonable exercise of its judgment, determine that such change equitably
requires an adjustment in the number or kind of units then subject to any option
pursuant to Section 1 or 2 hereof, such adjustment shall be made by the Managing
General Partner and shall be conclusive, effective and binding for all purposes
hereof.
6. Restrictions on Transfer. Barclays agrees that this Agreement
------------------------
and the rights granted to Barclays hereunder may not be sold, assigned or
transferred to any other Person or entity except for (a) Barclays' wholly-owned
subsidiary, Barclays Capital Corporation or (b) any other wholly-owned
Subsidiary of Barclays consented to in writing by Muzak which is not subject to
backup withholding under Section 3406 of the Code.
7. Amendments and Waivers. No provision of this Agreement may be
----------------------
amended, supplemented, waived, discharged or terminated other than by a written
instrument signed by Barclays and Muzak.
8. Specific Performance. Muzak and Barclays shall each have the
--------------------
right to specific performance by the other of the provisions of this agreement.
Each of Barclays and Muzak hereby irrevocably waives, to the extent that it may
do so under applicable law, any defense based on the adequacy of a remedy at
<PAGE>
3
law which may be asserted as a bar to the remedy of specific performance in any
action brought for specific performance of this Agreement by one of the parties
hereto.
9. Execution of Partnership Agreement. If the option described in
----------------------------------
Section 1 or 2 hereof is exercised, the recipient of the Put/Call Units shall
execute and deliver a counterpart of the Partnership Agreement.
10. Notices. All notices, consents, requests and demands to or upon
-------
the respective parties hereto to be effective shall be in writing or by
telecopier and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand or by overnight courier, or
when deposited in the mail, certified mail, return receipt requested, postage
prepaid, three (3) days after being so deposited or, in the case of telecopy
notice, when sent and acknowledged, addressed as follows to Muzak and Barclays,
or to such address or other address as may be hereafter notified in writing by
Muzak or Barclays to the other:
The Borrower: Muzak Limited Partnership
400 North 34th Street
Suite 200
Seattle, Washington 98103
Attention: Mr. John R. Jester
Telecopier: (206) 633-6210
Telephone: (206) 633-3000
With a copy to: MLP Acquisition, L.P.
c/o Centre Partners, L.P.
One Rockefeller Plaza
New York, New York 10020
Attention: Mr. Lester Pollack
Telecopier: (212) 632-4846
Telephone: (212) 632-4829
With a copy to: Rosenman & Colin
575 Madison Avenue
New York, NY 10022
Attention: Mr. Michael Roth
Telecopier: (212) 940-8776
Telephone: (212) 940-8800
Barclays: Barclays Bank PLC
222 Broadway
New York, New York 10036
Attention: Patrick N.W. Turner
Telecopier: (212) 412-6780
Telephone: (212) 412-6777
11. Benefits of the Agreement. Nothing in this Agreement shall be
-------------------------
construed to give to any Person or corporation other than Barclays (and its
permitted assignees) and Muzak any
<PAGE>
4
legal or equitable right, remedy, or claim under this Agreement and this
Agreement shall be for the sole and exclusive benefit of Barclays (and its
permitted assignees) and Muzak.
12. Confidentiality. Barclays agrees to hold in confidence in
---------------
accordance with Section 10.08 of the Partnership Agreement any Partnership
Information (as defined in such Section 10.08) it may receive from and after the
date hereof pursuant to this Agreement or the Partnership Agreement.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
14. TERMINATION. This Agreement shall terminate upon exercise of the
-----------
option described in Section 1 or 2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
MLP OPERATING, L.P.
By: MLP ACQUISITION, L.P.
its Managing General Partner
By: MUSIC HOLDINGS CORP.,
its General Partner
By: [SIGNATURE ILLEGIBLE]
-----------------------------------
Title: VP
BARCLAYS BANK PLC, NEW YORK BRANCH
By: [SIGNATURE ILLEGIBLE]
---------------------------------------------
Title: President
<PAGE>
Exhibit 10.7
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been
separately filed with the Commission.
UPLINK FACILITY AGREEMENT
UPLINK FACILITY AGREEMENT (the "Agreement"), made as of this 28th day of
----
Dec. , 1995, between EchoStar Satellite Corporation, a Colorado
----
corporation ("EchoStar"), with offices at 90 Inverness Circle East, Englewood,
Colorado 80112, and Muzak Limited Partnership, a Delaware limited partnership
("Muzak"), with offices at 2901 Third Avenue, Suite 400, Seattle, Washington
98121.
RECITALS
A. EchoStar and Muzak, contemporaneous with the execution of this
Agreement, have entered into a DBS Programming Affiliation Agreement (the "DBS
Affiliation Agreement") and a Video Programming Sales Agent Agreement (the
"Video Agreement"), which DBS Affiliation Agreement and Video Agreement
contemplated the execution of this Agreement contemporaneous therewith; and
B. EchoStar is engaged in the business of, among other things, providing
direct broadcast satellite-delivered, multi-channel, digital video, audio and
data services to commercial and residential subscribers, itself and through its
authorized EchoStar Sales Agents (as hereinafter defined); and
C. Muzak is engaged in the business of, among other things, producing and
distributing subscription music, video, data and other services to commercial
subscribers, through its owned and independent affiliates; and
D. Muzak desires to utilize, and EchoStar desires to permit Muzak to use,
EchoStar's Uplink Facility (as hereinafter defined), so that Muzak may deliver
via the EchoStar System (as hereinafter defined) certain Muzak Services (as
hereinafter defined) for distribution by Muzak and Muzak Affiliates (as
hereinafter defined) and so that EchoStar may deliver via the EchoStar System
certain Muzak Services for distribution by EchoStar and EchoStar Sales Agents,
all subject to the terms and conditions more fully set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
SECTION 1. DEFINITIONS
In addition to the terms defined above or elsewhere in this Agreement, the
following capitalized terms shall have the meanings ascribed to them in this
Section 1. (It is the intent of the parties that the definitions used in this
Agreement be consistent with the definitions used in the DBS Affiliation
Agreement and the Video Agreement. To the extent of any conflict between a
defined term in this Agreement and a defined term in the DBS Affiliation
Agreement or the
1
<PAGE>
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
Video Agreement, it is the parties' intent that the two terms be interpreted in
the most reasonable manner so as to give the same or as reasonably similar an
interpretation to such defined term as is possible.)
1.1 "Affected Party" shall have the meaning given to such term in Section
10.2 of this Agreement.
1.2 "Affiliate Consent" shall have the meaning given to such term in
Section 10.4 of this Agreement.
1.3 "Affiliated Entities" shall mean, with respect to any person or
entity, any other person or entity directly or indirectly controlling,
controlled by or under common control (i.e., the power to direct affairs by
reason of ownership of voting stock, by contract or otherwise) with, such person
or entity, any partner of such person or entity, and any member, director,
officer or employee of such person or entity.
1.4 "Combined Access Fee" shall have the meaning given to such term in
Section 4.2 of this Agreement.
1.5 "Commercial Music Channels" shall mean the Music Channels programmed
by Muzak, which are predominantly targeted for Commercial Music Subscribers.
1.6 "Commercial Music Subscriber" shall mean a Subscriber to the Music
Channels and/or Exclusive Muzak Channels at retail, business, office or other
commercial locations.
1.7 "EchoStar Indemnities" shall mean EchoStar, its Affiliated Entities,
its EchoStar Sales Agents, its contractors, subcontractors, authorized
distributors, agents and programming suppliers, and the partners, directors,
officers, employees and agents of EchoStar, its Affiliated Entities, its
EchoStar Sales Agents, its contractors, subcontractors, distributors, agents and
programming suppliers.
1.8 "EchoStar Sales Agents" shall mean those persons or entities
authorized by EchoStar to act as agents of EchoStar to solicit orders for
certain audio, video and data programming services delivered via the EchoStar
System, with the exception of Participating Muzak Affiliates.
1.9 "EchoStar System" shall mean the direct broadcast satellite delivery
system utilized by EchoStar and located at a 119 degrees orbital slot assignment
with 12.2 to 12.7 GHz downlink frequencies, and authorized by the Federal
Communications Commission ("FCC") for delivery of multi-channel digital audio,
video and data services.
2
<PAGE>
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
1.10 "EchoStar's Uplink Facility" shall mean EchoStar's satellite uplink
and broadcast center located in Cheyenne, Wyoming that serves the function of
uplinking satellite signals to the EchoStar System.
1.11 "Exclusive Muzak Channels" shall mean the three channels described in
Section 2.1(a) of this Agreement until the Second Satellite Launch, and, upon
the Second Satellite Launch such number of channels as the 2.4 megahertz of
transponder capacity referred to in Section 2.1(b) will carry, which may be used
for music, advertising or data transmissions, or for any other purpose that does
not duplicate the video programming provided by EchoStar on the EchoStar System,
or that does not otherwise conflict with the terms hereof. The Exclusive Muzak
Channels may be in mono or stereo sound, as determined by Muzak in its sole
discretion.
1.12 "Exclusive Muzak Territories" shall have the meaning given to such
term in Section 10.4 of this Agreement.
1.13 "Force Majeure" shall mean an event described in Section 11.8 of this
Agreement.
1.14 "Indemnified Party" shall mean a party seeking indemnification
pursuant to Section 9.3 of this Agreement.
1.15 "Indemnifying Party" shall mean a party from whom indemnification is
sought pursuant to Section 9.3 of this Agreement.
1.16 "Monthly Facility Lease Rate" shall have the meaning given to such
term in Section 2.3 of this Agreement.
1.17 "Monthly Muzak Subscriber Number" shall have the meaning given to such
term in Section 4.2 of this Agreement.
1.18 "Music Channels" shall mean Residential Music Channels and Commercial
Music Channels, and shall not include the Exclusive Muzak Channels.
1.19 "Muzak" shall have the meaning given to such term in the introductory
paragraph of this Agreement, and shall be deemed to include owned Muzak
Affiliates, except where circumstances otherwise require or where it would not
be logical to infer such inclusion.
1.20 "Muzak Affiliates" shall mean those existing owned and independent
operators at the effective date of this Agreement, and their successors,
assignees or transferees as permitted by Muzak, that have the exclusive right to
use the existing Muzak(R) trademark and certain other trademarks of Muzak, and
to distribute subscription music services, adjunct services related to the
sequencing, changing and switching of music-program communications,
3
<PAGE>
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
and certain adjunct services related to the delivery of advertising, data and
video communications in Exclusive Muzak Territories.
1.21 "Muzak Affiliation Agreement" shall mean collectively the franchise
agreement and the Participating Affiliate Agreement between Muzak and an
independent Muzak Affiliate.
1.22 "Muzak Indemnities" shall mean Muzak, Muzak Affiliates, its Affiliated
Entities, its contractors, subcontractors and authorized distributors and
agents, and the partners, directors, officers, employees and agents of Muzak,
Muzak Affiliates, such Affiliated Entities, contractors, subcontractors,
distributors and agents.
1.23 "Muzak Royalties" shall mean the royalty paid by Muzak Affiliates to
Muzak pursuant to their Muzak Affiliation Agreements with Muzak in consideration
of the right to distribute music services. Muzak Royalties are currently eleven
percent (11%) of the "gross billings" (as defined in the Muzak Affiliation
Agreement) per Muzak Service subscriber and for the purpose of this Agreement
shall in no event increase in excess of fifteen percent (15%) of the "gross
billings" (as defined in the Muzak Affiliation Agreement) per Muzak Service
subscriber.
1.24 "Muzak Services" shall mean the Music Channels and the Exclusive Muzak
Channels, which EchoStar uplinks for Muzak under this Agreement.
1.25 "Muzak Subscriber" shall mean any Residential Music Subscriber or
Commercial Music Subscriber which is activated by EchoStar on behalf of Muzak or
a Participating Muzak Affiliate.
1.26 "Other Party" shall have the meaning given to such term in Section
10.2 of this Agreement.
1.27 "Participating Muzak Affiliate" shall mean an independent Muzak
Affiliate that executes a Participating Affiliate Agreement with Muzak, which
thereby shall become a part of the Muzak Affiliation Agreement.
1.28 "Participating Affiliate Agreement" shall mean the agreement between
Muzak and an independent Muzak Affiliate pursuant to which Muzak obtains
Affiliate Consent and which agreement requires Participating Muzak Affiliates to
comply with all terms and conditions in this Agreement, the Video Agreement and
the DBS Affiliation Agreement, applicable to Participating Muzak Affiliates.
1.29 "Performance Right Fees" shall have the meaning given to such term in
Section 2.3 of this Agreement.
4
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UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
1.30 "Residential Music Channels" shall mean the Music Channels programmed
by Muzak, which are predominantly targeted for Residential Music Subscribers.
1.31 "Residential Music Subscriber" shall mean a Subscriber to the Music
Services and/or the Exclusive Muzak Channels at a residential location and for a
residential purpose.
1.32 "Royalty Fees" shall have the meaning given to such term in Section
4.2(a) of this Agreement.
1.33 "Second Satellite Launch" shall mean the initial date on which
EchoStar commences transmission of the Video Services or Muzak Services on a
second EchoStar System satellite, which date shall in no event be later than
December 31, 1997.
1.34 "Service Launch" shall mean the initial date on which EchoStar
commences transmission of any Muzak Services for revenue generating purposes,
which date shall in no event be later than October 31, 1996.
1.35 "Subscribers" shall mean any party which is activated by EchoStar to
receive one or more of the Muzak Services via the EchoStar System, including
Commercial Music Subscribers and Residential Music Subscribers.
1.36 "Term" shall mean the duration of this Agreement, as set forth in
Section 10.1 hereof.
1.37 "Territory" shall mean the footprint of the EchoStar System, subject
to any international, foreign, Federal, state, local or municipal, conventions,
treaties, laws, statutes, regulations, rules, ordinances or codes, or
prohibitions contained in programming agreements, which otherwise limit or
restrict EchoStar's right or ability to deliver any audio, video or data
programming services via the EchoStar System for receipt in any given
jurisdiction.
1.38 "Third Party Claim" shall mean any claim, assessment, action, suit,
audit or proceeding by a third party in respect of which indemnity may be sought
pursuant to Section 9. of this Agreement.
1.39 "Uplink Fees" shall have the meaning given to such term in Section 4.1
of this Agreement.
SECTION 2. MUZAK SERVICES
2.1 Uplink of Muzak Services. EchoStar will uplink to, and transmit from,
------------------------
the EchoStar System, the following Muzak Services in accordance with the
following schedule:
5
<PAGE>
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
(a) Effective upon Service Launch, and until the Second Satellite
Launch, EchoStar will transmit the following channels: three (3) Exclusive
Muzak Channels, being Muzak's Environmental(R) Channel (east and west coast
feeds) and Muzak's FM-One(R) channel; fourteen (14) Residential Music Channels;
and thirteen (13) Commercial Music Channels (a total of twenty-seven (27) Music
Channels).
(b) Effective upon the Second Satellite Launch, EchoStar will
transmit thirty (30) Music Channels (which shall include the 27 Music Channels
referred to in paragraph (a) above (subject to modifications as requested by
EchoStar in accordance with the DBS Affiliation Agreement), plus three
additional Music Channels). Effective upon the Second Satellite Launch, EchoStar
will also allocate for the exclusive use of Muzak and Participating Muzak
Affiliates (subject to Section 2.8 below) 2.4 megahertz of transponder capacity
on the EchoStar System (which may be provided on the first or second EchoStar
System satellite, as determined in EchoStar's sole discretion), and will
transmit such number of Exclusive Muzak Channels as such transponder capacity
will carry (which shall include the three Exclusive Muzak Channels referred to
in paragraph (a) above). The content of the Exclusive Muzak Channels shall be
determined by Muzak in its sole discretion; provided, however, that the content
thereof shall meet Muzak's representations, warranties and covenants in Section
7.2(a). The parties acknowledge that Muzak's ability to use all 2.4 megahertz of
transponder capacity will be subject to EchoStar's allocation of adequate space
for Muzak's equipment at its Uplink Facility, which space is described in
Section 2.5 below.
(c) EchoStar agrees to (i) transmit the signal of the Exclusive Muzak
Channels in a digitally compressed, encrypted format, via the Echostar System;
and (ii) activate and deactivate equipment (IRDs) for exhibition of the
Exclusive Muzak Channels as transmitted via the EchoStar System.
(d) If EchoStar exercises its right pursuant to the DBS Affiliation
Agreement to discontinue distribution of Music Channels, EchoStar, upon thirty
(30) days prior written notice to Muzak, may further elect to discontinue to
uplink the Music Channels under this Agreement. If EchoStar discontinues uplink
of the Music Channels, EchoStar will, however, uplink for Muzak and Muzak
Affiliates, in accordance with the terms of this Agreement, the Exclusive Muzak
Channels (on either the first EchoStar System satellite or the second EchoStar
System satellite, as determined in EchoStar's sole discretion).
2.2 Ownership of Muzak Services. All ownership, right, title and interest
---------------------------
of any nature in and to all or any part of the Muzak Services, and any
programming contained therein, is vested exclusively in Muzak, and EchoStar
shall have no right, title or interest in or to all or any part of the Muzak
Services or any programming contained therein.
6
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
2.3 Cost of Muzak Services and Performance Right Fees.
-------------------------------------------------
(a) Muzak shall be responsible for all costs of programming,
production, playback and transmission of the Muzak Services to EchoStar's Uplink
Facility. Subject to Section 2.1(f) and 2.3(a) of the DBS Affiliation
Agreement, and Section 2.3(b) below, Muzak shall be responsible for the costs
of copyright, royalty or other performance rights payments through to the
viewer, including, without limitation, payments to ASCAP, BMI, SESAC and any
other applicable music performance society or other applicable entity
(collectively referred to as "Performance Right Fees") with respect to the sale
of all Music Channels to any Residential Music Subscribers. Muzak and
Participating Muzak Affiliates, as applicable, shall be responsible for all
costs associated with Performance Right Fees, with respect to the sale by Muzak
or Participating Muzak Affiliates, as applicable, of Muzak Services to
Commercial Music Subscribers. EchoStar and the EchoStar Sales Agents shall be
independently responsible for all costs associated with Performance Right Fees
with respect to the sale of any Muzak Services to a Commercial Music Subscriber
by EchoStar or EchoStar Sales Agents, and EchoStar acknowledges that Muzak has
no responsibility for such Performance Rights Fees. In the event that the sale
of any Exclusive Muzak Channel to a Residential Music Subscriber by EchoStar or
EchoStar Sales Agents results in an increase in the Performance Right Fees
payable by Muzak with respect to such Exclusive Muzak Channels or the Music
Channels, EchoStar shall pay the portion of such increase allocable to
Residential Music Subscribers sold by EchoStar or EchoStar Sales Agents.
(b) The parties acknowledge that each Music Channel shall be deemed
to have a value of [**]. If for any reason EchoStar prices any Music Channels
at a higher rate, resulting in an increase in Performance Rights Fees payable by
Muzak hereunder as of the date this Agreement is executed, EchoStar shall pay
such increase.
2.4 Additional Equipment. Muzak shall be responsible for any equipment
--------------------
(including the Mpeg Audio Encoder Boards) necessary for EchoStar to receive and
uplink the Muzak Services at the point the Muzak Services exit the Mpeg Audio
Encoder Boards, other than equipment which EchoStar currently utilizes for
receiving and uplinking signals to the EchoStar System.
2.5 Cost of Transmission and Monthly Facility Use Fee. Except as provided
-------------------------------------------------
to the contrary in Section 2.4 above and subject to this Section 2.5, EchoStar
shall be responsible for all costs of transmission of the Muzak Services from
EchoStar's Uplink Facility to the EchoStar System and to Subscribers to the
Muzak Services. Muzak shall pay to EchoStar a monthly facility use fee of (i)
[**] from the date of Service Launch until the date of the Second Satellite
Launch; and (ii) [**] for the remainder of the Term, in each case subject
to the CPI increases described below, for the use of approximately 900 square
feet of space until the Second Satellite Launch, and 1800 square feet of space
thereafter, and equipment, at EchoStar's
7
<PAGE>
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
Uplink Facility (the "Monthly Facility Use Fee"). For each twelve (12) month
period after the first twenty-four (24) months of the Term, the Monthly Facility
Use Fee shall increase based on the percentage increase in the consumer price
index for all urban consumers ("CPI") in the preceding twelve (12) month period.
Such CPI increase shall take effect on the first day of each succeeding twelve
(12) month period. Muzak shall be responsible for all Muzak equipment operation
and maintenance at EchoStar's Uplink Facility.
2.6 Technical Specifications for Muzak Services. Muzak shall provide to
-------------------------------------------
EchoStar signals for the Muzak Services with the technical specifications set
forth on Schedule 1 hereto.
2.7 Muzak and Muzak Affiliate Distribution Rights. Subject to the terms
---------------------------------------------
and conditions of this Agreement, Muzak and Participating Muzak Affiliates may
sell subscriptions to the Muzak Services to Commercial Music Subscribers, and
EchoStar will activate such Muzak Services for such Muzak Subscribers via the
EchoStar System. Muzak and Participating Muzak Affiliates may sell
subscriptions to the Muzak Services to Residential Music Subscribers on the
terms set forth in the Video Agreement, and will not sell the Muzak Services to
Residential Music Subscribers except pursuant to the Video Agreement and the
EchoStar Dealer Agreement (as defined in the Video Agreement).
2.8 EchoStar and EchoStar Sales Agents Distribution Rights. Pursuant to
------------------------------------------------------
the terms and conditions of the DBS Affiliation Agreement, EchoStar shall have
the right to sell, itself and through EchoStar Sales Agents, the Music Channels
to Commercial Music Subscribers and Residential Music Subscribers. In addition,
subject to the terms and conditions of this Agreement, EchoStar shall have the
right to sell (at no cost, other than Performance Right Fees as described in
Section 2.3(a) above), itself and through EchoStar Sales Agents, the Exclusive
Muzak Channels (except the Environmental(R) and FM-One(R) channels) to
Residential Subscribers.
2.9 Control Over System. Notwithstanding anything to the contrary in this
-------------------
Agreement, EchoStar shall always be entitled to exercise control over all
aspects of the EchoStar System, including any programming or other material
provided by Muzak, but only to the minimum extent EchoStar is required to do so
by Federal Communications Commission or similar law, rule or regulation.
SECTION 3. VIDEO AGREEMENT AND DBS AFFILIATION AGREEMENT
3.1 Video Agreement. Contemporaneous with the execution of this
---------------
Agreement, the parties have executed the Video Agreement, which permits Muzak
and Participating Muzak Affiliates to solicit orders for, as agents of EchoStar,
certain video programming packages determined by EchoStar and delivered via the
EchoStar System.
8
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
3.2 DBS Affiliation Agreement. Contemporaneous with the execution of this
--------------------------
Agreement, the parties have executed the DBS Affiliation Agreement, pursuant to
which EchoStar shall distribute certain Muzak Services, itself and through
EchoStar Sales Agents, via the EchoStar System.
SECTION 4. FEES
4.1 Uplink Fees. Effective upon Service Launch and until the Second
-----------
Satellite Launch, Muzak shall pay EchoStar on a monthly basis [**] for
carriage of the Exclusive Muzak Channels, and, effective upon the Second
Satellite Launch, Muzak shall pay EchoStar on a monthly basis [**] for
carriage of the Exclusive Muzak Channels (collectively, the "Uplink Fees").
4.2 Royalty Fee.
-----------
(a) Subject to the following sentence, for so long as Muzak is
providing the Music Channels to EchoStar in accordance with the DBS Programming
Agreement, Muzak and the Participating Muzak Affiliates will each pay to
EchoStar each month a fee per Commercial Music Subscriber in an amount equal to
[**] of Commercial Muzak Collections for any sales of any Muzak Services by
Muzak or such Participating Muzak Affiliate ("Royalty Fees"). If the Second
Satellite Launch is not accomplished by October 31, 1996, Muzak's and the
Participating Muzak Affiliates' obligations to pay Royalty Fees hereunder shall
be suspended until such time as the Second Satellite Launch is accomplished,
unless, at EchoStar's option, it then allocates 2.4 megahertz of transponder
capacity on the first EchoStar System satellite for distribution of the
Exclusive Muzak Channels.
(b) "Commercial Muzak Collections" means the recurring monthly
charges collected from a Commercial Music Subscriber for the provision of Muzak
Services on the EchoStar System, but shall not include: (i) any reasonable
amounts collected from a Muzak Subscriber for the lease, purchase or
installation of any equipment used to receive or distribute the Muzak Services
in accordance with Muzak's and the Participating Muzak Affiliates' historical
practices and, to the extent applicable, Generally Accepted Accounting
Principles; (ii) any reasonable amounts collected from Muzak Subscribers for
sound system or video equipment lease, purchase, installation or maintenance in
accordance with Muzak's and the Participating Muzak Affiliates' historical
practices and, to the extent applicable, Generally Accepted Accounting
Principles; (iii) Performance Right Fees; and (iv) applicable sales, use or
other excise taxes with respect to the Muzak Services. Muzak and Participating
Muzak Affiliates may deduct Muzak Royalties from Commercial Muzak Collections.
It is further understood that Muzak and Participating Muzak Affiliates may offer
previews or free trials of the Muzak Services in keeping with their normal
practices, which free previews or trials shall be excluded from the payment
calculations pursuant to this Section 4.2.
9
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
4.3 Combined Access Fees. In consideration for access to the EchoStar
--------------------
System for the purpose of authorizing Commercial Music Subscribers to receive
the Muzak Services, Muzak, or, as appropriate, the Participating Muzak Affiliate
also shall pay to EchoStar each month, a combined conditional access fee and
smart card contingent replacement fee of [**] (the "Combined Access Fee") for
each and every Commercial Music Subscriber sold by Muzak or such Participating
Muzak Affiliate and activated to receive the Muzak Services via the EchoStar
System (the "Monthly Muzak Subscriber Number"), whether or not such Commercial
Music Subscribers are also receiving EchoStar Video Services. The Monthly Muzak
Subscriber Number shall be calculated by adding the number of authorized Muzak
Subscribers for Muzak and each Participating Muzak Affiliate on the first day of
the reporting month to the number of authorized Muzak Subscribers for Muzak and
each Participating Muzak Affiliate on the last day of the reporting month and
dividing that number by two (2).
4.4 Re-Connect Fees. Muzak and each Participating Muzak Affiliate shall
---------------
pay to EchoStar "re-connect" and "re-disconnect" fees for re-connecting and/or
re-disconnecting Commercial Music Subscribers at the request of Muzak or such
Participating Muzak Affiliate in the amount of [**] per reconnection or re-
disconnection ("Re-Connect Fees"). Re-Connect Fees shall not apply to any
initial subscriber activation or disconnection, and shall not apply to any
reconnection more than 180 days after disconnection of such subscriber (an
"Exempt Re-Connection") or the next disconnection following an Exempt Re-
Connection.
SECTION 5. PAYMENTS
5.1 Monthly Facility Use Fee. In advance on the first day of each month
------------------------
during the Term following the Service Launch and without notice from or demand
by EchoStar, Muzak shall pay to EchoStar the Monthly Facility Use Fee. If the
Service Launch or the Second Satellite Launch occurs other than on the first day
of the month, the Monthly Facility Use Fee for such month shall be adjusted on a
pro rata basis, and payable within five (5) days after Service Launch or the
Second Satellite Launch, as the case may be.
5.2 Uplink Fees. EchoStar will invoice Muzak on a monthly basis for the
-----------
Uplink Fees. Payment by Muzak for Uplink Fees shall be made within forty five
(45) days following the end of the month in which such Uplink Fees were
incurred. If the Service Launch or the Second Satellite Launch occurs other
than on the first day of the month, the Uplink Fee for such month shall be
adjusted on a pro rata basis.
5.3 Combined Access Fees and Re-Connect Fees. EchoStar will invoice Muzak
----------------------------------------
and each Participating Muzak Affiliate on a monthly basis for the Combined
Access Fees and Re-Connect Fees. Muzak and each Participating Muzak Affiliate
shall pay to EchoStar the Combined Access Fees and Re-Connect Fees billed by
EchoStar within forty-five (45) days following the end of the month in which
such Fees were incurred.
10
<PAGE>
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
5.4 Royalty Fees. All monthly Royalty Fees required to be made by Muzak
------------
and the Participating Muzak Affiliates shall be paid within forty-five (45) days
of the end of each month.
5.5 Late Payments. In the event that any overdue balances are ever owed
-------------
by Muzak or a Participating Muzak Affiliate to EchoStar, late charges shall be
assessed on a monthly basis at the rate of 1.5% of the outstanding balance per
month or the maximum amount allowed by law, whichever is lower. Notwithstanding
the above, Muzak and each Participating Muzak Affiliate shall each have one (1)
late payment of no more than ten (10) days following the date upon which such
amount was due in any calendar year without incurring late payment charges with
respect to such payment due.
5.6 Deactivation of Muzak Subscribers. Muzak or the applicable
---------------------------------
Participating Muzak Affiliate shall detail the reason for deactivation (e.g.,
non-payment or other reason) in connection with any request for deactivation of
a Muzak Subscriber. In the event Muzak or a Participating Muzak Affiliate fails
to pay EchoStar any fees payable hereunder in full when due as a result of non-
payment by a Muzak Subscriber, whether due to a bona fide billing dispute or
otherwise, Muzak or the applicable Participating Muzak Affiliate shall so inform
EchoStar in writing thereof at the time of payment of the applicable fees and
shall have sixty (60) days to obtain payment or otherwise resolve such dispute.
EchoStar shall cooperate with Muzak or the applicable Participating Muzak
Affiliate in the resolution of any bona fide billing dispute with a Muzak
Subscriber. If payment is not obtained or the dispute is not otherwise resolved
within such sixty (60) day period, EchoStar may deactivate the non-paying Muzak
Subscriber.
5.7 Subscriber Cancellations. EchoStar understands that any Muzak
------------------------
Services which are cancelled by a Subscriber, or for which a credit is issued,
shall effect a pro rata reduction in Royalty Fees paid or payable to EchoStar,
to be assessed as a charge back to EchoStar, which charge back may be offset
against any money due to EchoStar from Muzak or the applicable Participating
Muzak Affiliate or otherwise to be reimbursed by EchoStar, as applicable, to
Muzak or the applicable Participating Muzak Affiliate.
5.8 Multi-Month Payments. In the case of multi-month subscriptions,
--------------------
Royalty Fees will be paid monthly as the Muzak Services are provided, even if a
multi-month payment is received by Muzak or a Participating Muzak Affiliate.
SECTION 6. REPORTS, BOOKS AND RECORDS; RIGHT TO AUDIT
6.1 Reports.
-------
Within forty five (45) days after the end of each month, Muzak and each
Participating Muzak Affiliate shall supply to EchoStar with respect to all Muzak
Subscribers such information as is requested by EchoStar to verify the payments
owed by Muzak and each Participating
11
<PAGE>
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
Muzak Affiliate under this Agreement, including, without limitation, the total
number of Muzak Subscribers authorized to receive one or more of the Muzak
Services during the current reporting month, the classification of such Muzak
Subscribers as Commercial Music Subscribers or Residential Music Subscribers,
the Muzak Services ordered by each Muzak Subscriber, the Commercial Muzak
Collections (including itemization) for each Muzak Subscriber, and the Muzak
Royalties deducted from such Commercial Muzak Collections.
6.2 EchoStar Audit Rights.
---------------------
(a) Muzak and Participating Muzak Affiliates shall keep complete and
accurate books and records of all Muzak Commercial Music Subscriber accounts,
including, without limitation, accounts and records related to the payment by
Muzak and Participating Muzak Affiliates of Performance Right Fees related to
the Muzak Services, Muzak Royalties and Commercial Muzak Collections. During
the Term and for a period of one (1) year thereafter, EchoStar or its designated
representative may, in its reasonable discretion, on at least ten (10) days'
advance written notice, not more than once in any twelve (12) month period, at
Muzak's or at the Participating Muzak Affiliates' offices, at reasonable times
within regular business hours approved by Muzak or the Participating Muzak
Affiliate, as applicable, which approval shall not be unreasonably withheld, and
at EchoStar's sole cost and expense, inspect and audit such books and records,
provided that such inspection and audit shall be no more extensive than is
required to verify that Muzak's and/or the Participating Muzak Affiliate's
payments to EchoStar have been properly computed in accordance with the terms of
this Agreement. EchoStar shall not assess Muzak or any Participating Muzak
Affiliate for amounts found, as a result of such audit, to be owing thereafter
if such amounts relate to a reporting period that ended more than two (2) years
prior to the date such audit commenced. In the event that any audit undertaken
by EchoStar results in a determination that there has been either an
underpayment or overpayment of the amounts due EchoStar hereunder, then within
thirty (30) days after such determination, Muzak and/or the applicable
Participating Muzak Affiliate, or EchoStar, as the case may be, shall pay to the
other the amount of such underpayment or overpayment, plus simple interest
accrued on a daily basis from the date payment was due to the date of payment,
at the prime rate of the Union Bank of Switzerland, New York Branch, in effect
at the time of payment. EchoStar shall bear all costs related to an audit
pursuant to this Section 6.2, except if such audit reveals an underpayment in
excess of five percent (5%) for all payments in the aggregate in the applicable
period audited, in which case Muzak or the applicable Participating Muzak
Affiliate, as the case may be, shall pay EchoStar's reasonable expenses related
to the audit.
(b) During any audit hereunder, EchoStar or its designated
representative (at EchoStar's cost and expense) may make copies of only those
books and records relating to Muzak Subscriber accounts of Muzak or
Participating Muzak Affiliates that are necessary for the verification of
statements and accountings to EchoStar and that were physically examined as
12
<PAGE>
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
part of the audit. EchoStar shall provide Muzak, or the Participating Muzak
Affiliate which has been audited (if applicable), with a copy of the audit
report so Muzak, or the Participating Muzak Affiliate (as applicable), can
verify the results of the audit. EchoStar shall take reasonable precautions to
safeguard the confidentiality of all such information, including, without
limitation, any copies thereof (and in any event EchoStar shall exercise the
same precautions it uses to safeguard its own confidential and proprietary
information) and shall destroy any such copies upon the mutually-confirmed
completion of the audit and payment in full of any fees and other charges
determined to be owing to EchoStar or Muzak and/or the Participating Muzak
Affiliate, as the case may be, as a result of such audit. EchoStar shall not,
during the Term or at any time thereafter, use any information disclosed or made
available by Muzak or a Participating Muzak Affiliate in the course of an audit
by EchoStar for any purpose whatsoever except to verify that Muzak's and the
Participating Muzak Affiliates' payments to EchoStar have been properly computed
in accordance with the terms of this Agreement.
(c) In the event that a party disputes the results of an audit, the
parties shall attempt to resolve the matter by conducting a new audit under the
joint supervision of their respective independent certified public accountants.
In the event that such new audit resolves the dispute, the cost of each party's
independent certified public accountants shall be borne by such party. In the
event that such new audit fails to resolve the dispute, the matter shall be
resolved by binding arbitration in Denver, Colorado under the then applicable
rules of the American Arbitration Association and the prevailing party shall be
reimbursed by the other party for all of its costs of the second audit, and for
its reasonable attorneys fees.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Mutual Representations, Warranties and Covenants.
------------------------------------------------
Each of the parties represents, warrants and covenants to the
other that: (i) it has full power and authority to enter into and fully perform
its obligations under this Agreement (with respect to Muzak, however, subject to
Affiliate Consent required pursuant to Section 10.4 below); (ii) it has not and
will not during the Term enter into any agreement or arrangement which limits
the full performance of its obligations hereunder; (iii) it is and will remain
in full compliance with all applicable local, state and Federal laws and
regulations, including but not limited to such statutes, laws, rules,
regulations and orders enforced, administered, promulgated or pronounced by the
FCC; (iv) the execution of this Agreement by it will not: (a) result in any
breach of, or constitute a default under, any contract, agreement, corporate
charter, bylaw, or other instrument or agreement to which it is a party or by
which it or its property may be bound or affected, or (b) require the consent of
any third party (with respect to Muzak, however, subject to Affiliate Consent
required pursuant to Section 10.4 below); (v) it has obtained, and shall
maintain in full force during the Term, such Federal, state and local
authorizations as are necessary to operate the business it is conducting in
connection with its rights and obligations
13
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UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
under this Agreement; (vi) it is under no obligation and will not become subject
to any obligation that might interfere with its performance of this Agreement
(with respect to Muzak, however, subject to Affiliate Consent required pursuant
to Section 10.4 below); and (vii) it will comply with all of its
representations, warranties, obligations, covenants and responsibilities herein
contained. All representations, warranties and covenants made hereunder shall
survive the execution of this Agreement.
7.2 Additional Muzak Representations, Warranties and Covenants.
----------------------------------------------------------
(a) Except to the extent that such material is designated by
EchoStar, Muzak warrants and covenants that the Muzak Services will not be
defamatory or obscene and will not contain any material which violates any
copyright, right of privacy or literary or dramatic right of any person or
entity. Muzak warrants that it shall secure and maintain any and all necessary
performing rights licenses required and that all applicable payments for
Performance Right Fees will be paid by Muzak during the Term, with respect to
the sale of all Muzak Services to all Residential Music Subscribers (except (i)
with respect to the sale of the Exclusive Muzak Channels to Residential
Subscribers by EchoStar or EchoStar Sales Agents, (ii) as provided in Section
2.1(f) and 2.3(a) of the DBS Affiliation Agreement, and (iii) as provided in
Section 2.3(b) above) and with respect to the sale by Muzak or Participating
Muzak Affiliates, as applicable, of Muzak Services to Commercial Music
Subscribers. Muzak and the Participating Muzak Affiliates shall secure and
maintain any and all necessary performing rights licenses and shall be
responsible for all applicable payments for Performance Rights Fees during the
Term, with respect to the sale of Muzak Services to their respective Commercial
Music Subscribers.
(b) Muzak, at its sole expense, and Participating Muzak
Affiliates, at their sole expense, shall obtain all permits and licenses which
may be required under any applicable Federal, state or local law, ordinance,
rule or regulation by virtue of any acts performed by Muzak or Participating
Muzak Affiliates in the performance of this Agreement, and promptly upon request
provide such permits or licenses to EchoStar for inspection. Muzak and
Participating Muzak Affiliates shall in the conduct of said business and in the
performance of this Agreement and the Muzak Affiliation Agreements, as
applicable, comply fully with all applicable Federal, state and local laws,
ordinances, rules and regulations, including, without limiting the foregoing,
all rules and regulations of the FCC or the Federal Trade Commission.
(c) Muzak and Participating Muzak Affiliates agree to comply
with all laws relating to signal piracy, which includes, but is not limited to,
unauthorized receipt, interception, publication, and/or distribution of and/or
interference with, privately-owned transmission of information.
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The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
(d) EchoStar warrants that it or the EchoStar Sales Agents shall
secure and maintain any and all necessary performing rights licenses required
and that all applicable payments for Performance Right Fees will be paid by
EchoStar or EchoStar Sales Agents, with respect to the sale of all Muzak
Services to all Commercial Music Subscribers by EchoStar or EchoStar Sales
Agents.
SECTION 8. NONCOMPETITION
8.1 Muzak Competitors. During the Term, EchoStar shall not, directly or
indirectly, within the Territory: (i) provide transponder space to; (ii) enter
into or maintain distributor agreements or relationships with; or (iii) enter
into any agreement for the programming or delivery of any audio services via DBS
frequencies (12.2 ghz. to 12.7 ghz.) with, the following competitors of Muzak in
the sale of commercial music services: [**]. Muzak acknowledges and understands
that an Affiliated Entity of EchoStar currently has an agreement with [**] for
the distribution of audio services via frequencies outside of the 12.2 ghz. to
12.7 ghz. bandwidth, and further acknowledges and agrees that such relationship
is not a violation of this Section 8.1.
8.2 EchoStar Competitors. During the Term, Muzak shall not, directly or
--------------------
indirectly, within the Territory: (i) secure transponder space for; (ii) enter
into or maintain distribution agreements or relationships with or (iii) enter
into any agreement for the programming or delivery of any Muzak Services with
(A) any entity which delivers video, audio and/or data via DBS frequencies (12.2
ghz. to 12.7 ghz.) or any affiliate, successor or assign of any such entity, or
(B) [**].
SECTION 9. INDEMNIFICATION
9.1 Indemnification by EchoStar. EchoStar shall indemnify and hold
---------------------------
harmless the Muzak Indemnities from, against and with respect to any and all
claims, damages, liabilities, costs and expenses (including reasonable
attorneys' and expert's fees) (collectively "Damages") incurred in connection
with any claim against any of the Muzak Indemnities arising out of: (i)
EchoStar's breach of any provision of this Agreement; and (ii) EchoStar's
advertising and marketing of the Muzak Services (except for advertising and
marketing materials supplied by or approved in writing by Muzak). In addition,
EchoStar shall pay and hold the Muzak Indemnities harmless from any Federal,
state or local taxes or fees that are based upon revenues derived by, or the
operations of, EchoStar. Notwithstanding anything to the contrary herein or
otherwise, in no event shall EchoStar have any liability to Muzak, the Muzak
Indemnities or any other person or entity arising out of, relating to or
resulting from the acts or omissions of the EchoStar Sales Agents.
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9.2 Indemnification by Muzak. Muzak shall indemnify and hold
------------------------
harmless the EchoStar Indemnities from, against and with respect to any and all
Damages incurred in connection with any claim against any of the EchoStar
Indemnities arising out of: (i) Muzak's breach of any provision of this
Agreement; (ii) material or programming contained in the Muzak Services to the
extent that EchoStar has not modified, altered or edited such Muzak Services, or
interrupted the distribution of such Muzak Services without Muzak's prior
written consent; (iii) Muzak's sale, promotion, distribution, advertising and
marketing of the Muzak Services; (iv) the distribution or cablecast of any
programming on the Muzak Services which violates any right of privacy or which
is defamatory or obscene in nature, or requires payment for any Performance
Right Fees, to the extent the payment of such Performance Right Fees are the
responsibility of Muzak hereunder; and/or (v) the deactivation by EchoStar of
any Muzak Subscriber at Muzak's instruction, or, in the absence of a bona fide
billing dispute pursuant to Section 5.6 above, deactivation by EchoStar of any
Muzak Subscriber if Muzak fails to instruct EchoStar to deactivate Muzak
Subscribers due to Muzak's failure to pay EchoStar any amounts due and payable
to EchoStar under this Agreement. In addition, Muzak shall pay and hold the
EchoStar Indemnities harmless from any Federal, state or local taxes or fees
that are based upon revenues derived by, or the operations of, Muzak.
Notwithstanding anything to the contrary herein or otherwise, in no event shall
Muzak have any liability to EchoStar, the EchoStar Indemnities or any other
person or entity arising out of, relating to or resulting from the acts or
omissions of Muzak's independent Muzak Affiliates, under this Agreement.
9.3 Indemnification Procedures. Should either party wish to assert a
--------------------------
claim for indemnification (a "Third Party Claim"), such party (the "Indemnified
Party") shall do so by promptly notifying the other party (the "Indemnifying
Party") in writing of such claim. The Indemnifying Party shall undertake the
defense of any Third Party Claim and permit the Indemnified Party to participate
therein at the Indemnified Party's expense. The settlement of any Third Party
Claim by an Indemnified Party, without the Indemnifying Party's prior written
consent, shall release the Indemnified Party from its obligations hereunder with
respect to such Third Party Claim so settled.
SECTION 10. TERM AND TERMINATION
10.1 Term. This Agreement shall commence on the date of execution by
----
both EchoStar and Muzak and shall continue until the expiration of the useful
life of the second EchoStar System satellite on which EchoStar has allocated 2.4
megahertz of transponder capacity to Muzak for carriage of the Exclusive Muzak
Channels, unless this Agreement is terminated as provided in this Section 10.
10.2 Termination Upon Default. This Agreement may be terminated by a
------------------------
party (the "Affected Party"), in accordance with the procedures set forth in
Section 10.3, upon the occurrence of any of the following with respect to the
other party (the "Other Party"):
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________________________________________________________________________________
(a) The Other Party loses any Federal Communications Commission,
broadcast, performance or similar license rights necessary to deliver the
services to be provided to the Affected Party under the terms of this Agreement,
and such default is not cured within sixty (60) days of receipt of written
notice from the Affected Party (or if such default cannot reasonably be cured by
the Other Party within such sixty (60) days, if such cure has been initiated by
the Other Party and the Other Party is diligently continuing to cure within that
time, the Other Party's opportunity to cure such default shall be extended for a
period of time not to exceed an additional thirty (30) days).
(b) The Other Party (which for purposes of this Section 10.2(b)
shall mean Muzak alone) commits a payment default which is not: (i) cured within
sixty (60) days of receipt of written notice from the Affected Party; or (ii)
reserved against in accordance with the escrow procedures outlined in Section
10.3 below.
(c) The Other Party (which, for purposes of this Section 10.2(c)
shall mean EchoStar alone) (i) is unable to launch the Muzak Services, as
applicable, on a first EchoStar System satellite by October 31, 1996 or (ii) is
unable to launch a second EchoStar System satellite by December 31, 1997 (unless
EchoStar then allocates, or has allocated, 2.4 megahertz of transponder capacity
to Muzak for carriage of the Exclusive Muzak Channels on the first EchoStar
System satellite), in each case, including without limitation due to the failure
to accomplish Service Launch or due to satellite failures, and such default is
not cured within sixty (60) days of receipt of written notice from the Affected
Party (or if such default cannot reasonably be cured by the Other Party within
such sixty (60) days, if such cure has been initiated by the Other Party and the
Other Party is diligently continuing to cure within that time, the Other Party's
opportunity to cure such default shall be extended for a period of time not to
exceed an additional thirty (30) days).
(d) The Other Party defaults on a material obligation or
breaches a material representation or warranty in this Agreement, the DBS
Affiliation Agreement, the Video Agreement, or the Trademark License Agreement
referred to in Section 8.1(a) of the Video Agreement, and such default or breach
is not cured within sixty (60) days of receipt of written notice from the
Affected Party (or if such default or breach cannot be reasonably cured by the
Other Party within sixty (60) days, if such cure has been initiated by the Other
Party and the Other Party is diligently continuing to cure within that time, the
Other Party's opportunity to cure such default or breach shall be extended for a
period of time not to exceed an additional thirty (30) days). A default or
breach under this Agreement shall also give rise to a default under the DBS
Affiliation Agreement and the Video Agreement.
(e) If the Other Party files bankruptcy, has an involuntary
petition in bankruptcy filed against it (which petition is not dismissed within
forty five (45) days after
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________________________________________________________________________________
filing), is insolvent, makes an assignment for the benefit of creditors or has a
trustee appointed to manage the affairs of the Other Party.
10.3 Termination Procedure. The Affected Party may exercise its
---------------------
termination rights pursuant to Section 10.2 above only by giving the Other Party
a notice of termination delivered in conformance with Section 11.1 of this
Agreement. Such notice shall specify the basis of termination, and shall
specify the applicable cure period. In the event of a payment default, the Other
Party may, within the sixty (60) day cure period referred to in Section 10.2(b)
above, escrow the disputed amount with an escrow agent acceptable to the
Affected Party, and notify the Affected Party (in conformance with Section 11.1
of this Agreement) that is has done so. If such disputed amount is deposited in
escrow in accordance with the prior sentence, the parties shall seek to promptly
resolve such dispute in the manner set forth in Section 11.9, and the escrow
agent shall be instructed to disburse the disputed amount only upon the receipt
of written instructions signed by both Muzak and EchoStar. Deposit of the
disputed amount in escrow will stay termination of this Agreement until the
dispute is resolved by the parties in the manner set forth in Section 11.9 or
the parties determine that the dispute cannot be resolved in accordance with
Section 11.9. Any dispute regarding whether a termination is effective shall be
resolved in the manner set forth in Section 11.9.
10.4 Consent of Muzak Affiliates. Nothing in this Agreement shall be
---------------------------
binding on any Muzak Affiliate until such time as such Muzak Affiliate executes
the Participating Affiliate Agreement and the EchoStar Dealer Agreement (as
defined in the Video Agreement), and then only to the extent set forth in such
Participating Affiliate Agreement and the EchoStar Dealer Agreement. The
parties hereby acknowledge that Muzak Affiliates have certain exclusive rights
to distribute certain Muzak Services in their respective areas (the "Exclusive
Muzak Territories"), and that the provision of the Muzak Service under the terms
of this Agreement and the grant of certain rights to EchoStar to distribute
certain of the Muzak Services may conflict with those exclusive rights.
Accordingly, the performance of this Agreement by Muzak is hereby conditioned
upon the prior written consent of all Muzak Affiliates ("Affiliate Consent"),
which consent will be solicited by Muzak promptly upon execution of this
Agreement. If Muzak fails to obtain Affiliate Consent within thirty (30) days
after the execution of this Agreement, Muzak may terminate this Agreement within
ten (10) days thereafter by providing written notice to EchoStar, and the DBS
Affiliation Agreement and the Video Agreement shall also automatically terminate
as of the effective date of termination of this Agreement. If Muzak elects not
to terminate this Agreement, notwithstanding that Muzak fails to obtain
Affiliate Consent, Muzak hereby agrees to indemnify and hold harmless the
EchoStar Indemnities from, against and with respect to any and all Damages
incurred in connection with any claim by any Muzak Affiliate against any of the
EchoStar Indemnities arising out of Muzak's failure to obtain Affiliate Consent.
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The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
10.5 Post-Termination Service.
------------------------
(a) Upon termination of this Agreement, all subscription
agreements to the Muzak Services sold to Commercial Music Subscribers by Muzak
or Participating Muzak Affiliates shall remain the exclusive property of Muzak
or such Participating Muzak Affiliates, as the case may be. Muzak acknowledges
and agrees that EchoStar has the sole and exclusive ownership, right, title and
interest of any nature in and to any video programming purchased by Subscribers.
(b) Upon termination of this Agreement by EchoStar pursuant to
Section 10.2(a), (d) or (e), Muzak may request, and EchoStar shall continue to
provide (subject to restrictions by law), the Muzak Services to Muzak
Subscribers for a period of six (6) months, at the same level that such Muzak
Services were provided prior to termination. EchoStar shall be entitled to
receive the Monthly Facility Use Fee, the Combined Access Fees, the Uplink Fees
and Royalty Fees in accordance with the provisions of Section 5, as if this
Agreement was in full force and effect. Muzak further may request and EchoStar
shall continue to provide (subject to restrictions by law) the Muzak Services to
Muzak Subscribers for an additional period of three (3) months, at the same
level that such Muzak Services were provided prior to termination. During such
additional three (3) month period, EchoStar shall be entitled to receive [**]
the compensation EchoStar would have been entitled to receive if this
Agreement was in full force and effect absent termination of this Agreement.
(c) Upon expiration or termination of this Agreement by Muzak
pursuant to Section 10.1, 10.2(a), (d) or (e), Muzak may request, and EchoStar
shall continue to provide (subject to restrictions by law), the Muzak Services
to Muzak Subscribers for a period of twelve (12) months, at the same level that
such Muzak Services were provided prior to termination (subject to Section
2.1(d)). EchoStar shall be entitled to receive the Monthly Facility Use Fee, the
Combined Access Fees, the Uplink Fees and the Royalty Fees in accordance with
the provisions of Section 5, as if this Agreement was in full force and effect.
(d) During the transition periods set forth in Sections 10.6(b)
or (c) above, and at any time after termination or expiration of this Agreement,
either party may negotiate and/or enter into agreements with any of the parties
listed in Section 8, as applicable, which it otherwise would be restricted from
doing so pursuant to Section 8 above.
(e) Muzak acknowledges and agrees that:
(i) all Residential Music Subscriber information
(regardless of whether the Subscriber has purchased Muzak Services); and
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MUZAK/ECHOSTAR
________________________________________________________________________________
(ii) all Commercial Music Subscriber information to the
extent neither Muzak nor any Participating Muzak Affiliate has sold Muzak
Services to such Commercial Music Subscriber,
including but not limited to names, addresses and profiles, are proprietary to,
and the exclusive property of, EchoStar. During the term of this Agreement
Muzak and the Participating Muzak Affiliates shall use that information only to
the extent required for their performance of this Agreement, or as specifically
permitted pursuant to this Agreement. Following expiration of the Agreement
neither Muzak nor any Participating Muzak Affiliate shall use any such
information for any reason, except to the extent specifically permitted above,
and for example but not by limitation, at no time either during the term of this
Agreement or following expiration thereof, shall Muzak or any Participating
Muzak Affiliate sell or otherwise provide that information to any third parties,
or use that information to solicit subscribers to subscribe to any other
programming service.
(f) EchoStar acknowledges and agrees that with respect to
Commercial Music Subscribers which have been sold Muzak Services by either Muzak
or a Participating Muzak Affiliate, all Commercial Subscriber information,
including but not limited to names, addresses and profiles, are proprietary to,
and the exclusive property of, Muzak or the applicable Participating Muzak
Affiliate. During the term of this Agreement EchoStar and EchoStar Sales Agents
shall use that information only to the extent required for their performance of
this Agreement, or as specifically permitted pursuant to this Agreement.
Following expiration of this Agreement EchoStar and EchoStar Sales Agents shall
not use any such information for any reason, except to the extent specifically
permitted above, and for example but not by limitation, at no time during the
term of this Agreement shall EchoStar or EchoStar Sales Agents sell or otherwise
provide that information to any third parties, and at no time either during the
term of this Agreement or following termination shall EchoStar or EchoStar Sales
Agents use that information to solicit subscribers to subscribe to any other
programming service.
EchoStar, Muzak and the Participating Muzak Affiliates agree that
with respect to any Commercial Music Subscriber not falling into one of the
above categories, upon, and at any time after, expiration of this Agreement,
either party may solicit the Commercial Music Subscriber to purchase any
services, subject to a party's rights in existing contracts.
The solicitation or sale of any services to any subscriber by
Muzak or a Participating Muzak Affiliate, on the one hand, or EchoStar or an
EchoStar Sales Agent, on the other hand, shall not be deemed to violate this
Section if proprietary subscriber information of the other party (as described
in this Section) is not used in connection with such solicitation or sale.
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________________________________________________________________________________
(g) The parties acknowledge that, in the event of any actual or
threatened breach of paragraph (e) or (f) above, EchoStar, in the case of
paragraph (e) and Muzak and Participating Muzak Affiliates, in the case of
paragraph (f), will suffer irreparable and ongoing harm which, while
substantial, will not be fully compensable by damages. As a consequence, in the
event of any actual or threatened breach of such provisions, the non-breaching
party may, in addition and supplementary to any and all other rights and
remedies existing in its favor, obtain immediate and ongoing injunctive relief,
enjoining or restraining whatever violation may have occurred or be occurring or
may have been threatened. This injunctive relief shall be in the form of a
temporary restraining order, preliminary injunction or similar relief, and a
permanent injunction, as may be sought by the non-breaching party.
10.6 Limitation of Liability.
-----------------------
(a) Upon expiration or in the event this Agreement terminates or
is terminated for any reason set forth herein, if EchoStar is not in breach of
this Agreement, then EchoStar and its Affiliated Entities shall have no
liability or obligation to Muzak whatsoever, and for example, but not by way of
limitation, Muzak shall have no right to require EchoStar to continue to uplink
the Muzak Services (except as required pursuant to Section 10.5 above). Muzak
agrees that upon expiration or in the event of termination of this Agreement for
any reason, if EchoStar is not in breach of this Agreement, no amounts spent in
its fulfillment will be recoverable by Muzak from EchoStar or any of its
Affiliated Entities.
(b) Upon expiration or in the event this Agreement terminates or
is terminated for any reason set forth herein, if Muzak is not in breach of this
Agreement, then Muzak and its Affiliated Entities shall have no liability or
obligation to EchoStar whatsoever, and for example, but not by way of
limitation, EchoStar shall have no right to require Muzak to continue to permit
EchoStar to uplink the Muzak Services (except as required pursuant to Section
10.5 above). EchoStar agrees that upon expiration or in the event of termination
of this Agreement for any reason, if Muzak is not in breach of this Agreement,
no amounts spent in its fulfillment will be recoverable by EchoStar from Muzak
or any of its Affiliated Entities.
(c) Notwithstanding any provision in this Agreement to the
contrary, under no circumstances shall either party be liable to the other party
for exemplary, special, incidental or consequential damages, including, without
limitation, for any payment for lost business, future profits, loss of goodwill,
reimbursement for expenditures or investments made or commitments entered into,
creation of clientele, advertising costs, termination of employees or employees'
salaries, or overhead or facilities incurred or acquired based upon the business
derived or anticipated under this Agreement.
10.7 Survival of Terms. The rights and obligations pursuant to
-----------------
Sections 5, 6, 7, 9, 10.5, 10.6, 10.7, 11.4 and 11.11 shall survive expiration
or termination of this Agreement.
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MUZAK/ECHOSTAR
________________________________________________________________________________
Any obligations of the parties arising prior to termination shall survive
termination of this Agreement and continue in full force and effect until the
same have been completely discharged.
SECTION 11. MISCELLANEOUS
11.1 Notices. Except as set forth below, all notices hereunder shall be
-------
in writing and delivered by hand or sent by certified mail, return receipt
requested, overnight delivery service or by facsimile to the receiving party at
its address or facsimile number set forth below or as otherwise designated by
written notice. Notice to EchoStar shall be provided as follows:
EchoStar Satellite Corporation
90 Inverness Circle East
Englewood, Colorado 80112
Attention: Carl E. Vogel, Executive Vice President
and Chief Operating Officer
Fax: (303) 799-0354
with copy to: EchoStar Satellite Corporation
90 Inverness Circle East
Englewood, Colorado 80112
Attention: David K. Moskowitz, Vice President
and General Counsel
Fax: (303) 799-0354
Notice to Muzak shall be provided as follows:
Muzak Limited Partnership
2901 Third Avenue, Suite 400
Suite 400
Seattle, WA 98121
Attention: President
Fax: (203) 623-6210
Notice given by mail shall be considered to have been given five (5) days after
the date of mailing, postage prepaid certified or registered mail. Notice given
by an overnight delivery service shall be considered to have been given on the
next business day. Notice given by facsimile shall be considered to have been
given on the date receipt thereof is confirmed during normal business hours,
with a hard copy to be mailed promptly thereafter.
11.2 Waiver. The failure of any party to insist upon strict
------
performance of any provision of this Agreement shall not be construed as a
waiver of any subsequent breach of the
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MUZAK/ECHOSTAR
________________________________________________________________________________
same or similar nature. All rights and remedies reserved to either party shall
be cumulative and shall not be in limitation of any other right or remedy which
such party may have at law or in equity.
11.3 Binding Agreement; Assignment. This Agreement shall be binding upon
-----------------------------
the parties hereto and their respective successors and assigns, except that it
may not be assigned (by transfer or by operation of law) by either party without
the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that either party may assign this
Agreement without the prior written consent of the other party in connection
with the sale of all or substantially all of its assets or equity interests
(including any sale of equity interests effected through a merger.
Notwithstanding the above, upon thirty (30) days prior written notice, either
party may assign this Agreement without the other party's consent to an
Affiliated Entity.
11.4 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Colorado applicable to contracts
made and fully performed therein by parties domiciled therein, without regard to
the conflicts of laws provisions thereof, except to the extent that the parties'
respective rights and obligations are subject to mandatory local, state and
federal laws or regulations.
11.5 Entire Agreement and Section Headings. This Agreement sets forth
-------------------------------------
the entire agreement and understanding of the parties relating to the subject
matter hereof. This Agreement shall not be modified other than in a writing,
signed by each of the parties hereto. The Section headings hereof are for the
convenience of the parties only and shall not be given any legal effect or
otherwise affect the interpretation of this Agreement.
11.6 Severability. The parties agree that each provision of this
------------
Agreement shall be construed as separable and divisible from every other
provision and that the enforceability of any one provision shall not limit the
enforceability, in whole or in part, of any other provision hereof. In the
event that a court of competent jurisdiction determines that a restriction
contained in this Agreement shall be unenforceable because of the extent of time
or geography, such restriction shall be deemed amended to conform to such extent
of time and/or geography as such court shall deem reasonable.
11.7 Confidentiality; Press Release.
------------------------------
(a) At all times during the Term and for a period of three (3)
years thereafter, the parties and their employees (and with respect to Muzak,
all Participating Muzak Affiliates must agree in writing (through the Muzak
Affiliation Agreement or otherwise) to comply fully with all of the
confidentiality provisions of this Agreement prior to disclosure by Muzak of any
information regarding EchoStar, this Agreement and any other agreements
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________________________________________________________________________________
between the parties in any way related to this Agreement) will maintain, in
confidence, the terms and provisions of this Agreement, as well as all data,
summaries, reports or information of all kinds, whether oral or written,
acquired or devised or developed in any manner from the other party's personnel
or files, and that they have not and will not reveal the same to any persons not
employed by the other party (with the exception of Muzak Affiliates, but solely
for the purpose of seeking Affiliate Consent, and to perform if Affiliate
Consent is received) except: (i) at the written direction of such party; (ii) to
the extent necessary to comply with law, the valid order of a court of competent
jurisdiction or the valid order or requirement of the Securities and Exchange
Commission or any successor agency thereto, in which event the disclosing party
shall so notify the other party as promptly as practicable (and, if possible,
prior to making any disclosure) and shall seek confidential treatment of such
information; (iii) as part of its normal reporting or review procedure to its
parent company, its auditors and its attorneys, and such parent company,
auditors and attorneys agree to be bound by the provisions of this Section 11.7;
(iv) in order to enforce any of its rights pursuant to this Agreement; (v) to
Affiliated Entities, potential investors, insurers and financing entities, and
such Affiliated Entities, potential investors, insurers and financing entities
agree to be bound by the provisions of this Section 11.7; and (vi) to the extent
necessary to permit the performance of its obligations under this Agreement.
EchoStar will be a named third party beneficiary of the agreements of
Participating Muzak Affiliates to comply with the terms of this provision.
(b) Promptly after the date of execution of this Agreement, the
parties shall use their reasonable best efforts to agree upon a mutually
acceptable press release with respect to the parties' general business
relationship under this Agreement and to jointly issue and release such press
release at a date and time mutually agreed upon.
11.8 Force Majeure.
-------------
(a) Neither EchoStar nor Muzak shall be responsible for any
failure or delay in the performance of any of their respective obligations under
this Agreement due to wars, riots, public disorders, acts of God, labor dispute,
natural disaster, technical failure (including the failure of all or part of the
domestic communications satellite, or transponders on which the Muzak Services
are delivered by EchoStar to Subscribers, or of the related uplinking or other
equipment) or any other reason beyond the reasonable control of the party whose
performance is prevented during the period of such occurrence (any such event a
"Force Majeure"). The Term shall be suspended during the period when a party is
unable to fulfill its obligations hereunder by reason of such occurrence.
(b) If after launch of EchoStar's first DBS satellite a Force
Majeure event decreases the number of available operating transponders on the
EchoStar System, after allocating transponder space to video programming
suppliers to which EchoStar is contractually obligated to allocate a specified
number of channels, EchoStar will then allocate remaining
24
<PAGE>
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
operating transponder space to Muzak on a pro rata basis, taking into
consideration the amount of bandwidth utilized to deliver the Muzak Services
prior to such decrease in available operating transponders as a percentage of
all available bandwidth utilized to deliver all other programming services
(excluding those video programming suppliers to which EchoStar is contractually
obligated to allocate a specified number of channels).
11.9 Dispute Resolution.
------------------
(a) Initial Dispute Resolution Procedures. Any dispute or
-------------------------------------
disagreement between EchoStar and Muzak arising out of this Agreement shall be
resolved according to the following dispute resolution procedure. First, such
dispute shall be addressed to each party's project manager (or equivalent level
manager) for discussion and attempted resolution. If any such dispute cannot be
resolved by such project managers within five (5) business days after the date
that either party gives notice that such dispute or disagreement exists, then
such dispute shall be immediately referred to the respective presidents for
discussion and attempted resolution.
(b) Subsequent Dispute Resolution Procedures. If a dispute
----------------------------------------
cannot be resolved to the mutual satisfaction of both parties within five (5)
business days (or such longer period as may be mutually agreed upon) after the
second-tier referral described in Section 11.9(a) above, then such dispute shall
be submitted to binding arbitration in Denver, Colorado pursuant to the then
applicable rules of the American Arbitration Association.
11.10 Independent Contractors. The parties hereto acknowledge and agree
-----------------------
that the relationship established under the Agreement shall be that of
independent contractors. EchoStar and Muzak shall not be deemed partners or
joint venturers for one another for any purpose whatsoever.
11.11 Taxes, Fees, etc. Each party, at its expense, shall pay and
----------------
discharge all license fees, business, use, sales, gross receipts, income,
property or other similar taxes or assessments which may be charged or levied
upon such party.
11.12 No Franchise Relationship. Muzak acknowledges that EchoStar has
-------------------------
not required Muzak or any Muzak Affiliate to pay any franchise fee or other
payment or to commit to pay any such fee or other payment as a condition of the
execution of this Agreement. Muzak represents and warrants to EchoStar that
Muzak does not and shall not deem or claim itself to be a franchisee of
EchoStar, either in relation to this Agreement, or for any purpose, or under any
applicable law. Muzak shall have sole responsibility for compliance with any law
relating to franchising with regard to its relationships with Muzak Affiliates.
11.13 Compliance with Law. The parties shall comply with, and agree
-------------------
that this Agreement is subject to, all applicable Federal, state and local laws,
rules and regulations,
25
<PAGE>
UPLINK FACILITY AGREEMENT
MUZAK/ECHOSTAR
________________________________________________________________________________
including, without limitation, all of the provisions of the Communications Act
of 1934 and all amendments thereto, now enacted or hereafter promulgated in
force during the Term.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
ECHOSTAR SATELLITE CORPORATION
By:[SIGNATURE ILLEGIBLE]
--------------------------
Name:
Title:
MUZAK LIMITED PARTNERSHIP
By:/s/ John R. Jester
---------------------------
Name: John R. Jester
Title: President
26
<PAGE>
Exhibit 10.8
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been separately
filed with the Commission.
DBS PROGRAMMING AFFILIATION AGREEMENT
DBS PROGRAMMING AFFILIATION AGREEMENT (the "Agreement"), made as of
this 28th day of Dec , 1995, between EchoStar Satellite Corporation, a
------ -----
Colorado corporation ("EchoStar"), with offices at 90 Inverness Circle East,
Englewood, Colorado 80112, and Muzak Limited Partnership, a Delaware limited
partnership ("Muzak"), with offices at 2901 Third Avenue, Suite 400, Seattle,
Washington 98121.
RECITALS
A. EchoStar and Muzak, contemporaneous with the execution of this
Agreement, have entered into a Video Programming Sales Agent Agreement (the
"Video Agreement") and an Uplink Facility Agreement (the "Uplink Agreement"),
which Video Agreement and Uplink Agreement contemplated the execution of this
Agreement contemporaneous therewith; and
B. EchoStar is engaged in the business of, among other things, providing
direct broadcast satellite-delivered, multi-channel, digital audio, video and
data services to commercial and residential subscribers, itself and through its
authorized EchoStar Sales Agents (as hereinafter defined); and
C. Muzak is engaged in the business of, among other things, producing and
distributing subscription music, video, data and other services to commercial
subscribers, through its owned and independent Muzak Affiliates (as hereinafter
defined); and
D. EchoStar desires to deliver via the EchoStar System (as hereinafter
defined) Music Channels (as hereinafter defined) for distribution by EchoStar
and EchoStar Sales Agents to residential and commercial consumers; and
E. Subject to the terms and conditions set forth below, Muzak agrees to
allow EchoStar to deliver Music Channels via the EchoStar System and offer
subscriptions thereto.
NOW, THEREFORE, in consideration of the mutual promises and the covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, Muzak and EchoStar agree as follows:
SECTION 1. DEFINITIONS
In addition to the terms defined above or elsewhere in this Agreement, the
following capitalized terms shall have the meanings ascribed to them in this
Section 1 (It is the intent of the parties that the definitions used in this
Agreement be consistent with the definitions used in the Uplink Agreement and
the Video Agreement. To the extent of any conflict between a defined term in
this Agreement and a defined term in the Uplink Agreement or the Video
Agreement, it is the parties' intent that the two terms be interpreted in the
most reasonable manner so as to give the same or as reasonably similar an
interpretation to such defined term as is possible.)
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 2
________________________________________________________________________________
1.1 "Affected Party" shall have the meaning given to such term in
Section 9.2 of this Agreement.
1.2 "Affiliate Consent" shall have the meaning given to such term in
Section 9.4 of this Agreement.
1.3 "Affiliated Entities" shall mean, with respect to any person or
entity, any other person or entity directly or indirectly controlling,
controlled by or under common control (i.e., the power to direct affairs by
reason of ownership of voting stock, by contract or otherwise) with, such person
or entity, any partner of such person or entity, and any member, director,
officer or employee of such person or entity.
1.4 "Commercial Music Channels" shall mean the Music Channels
programmed by Muzak which are predominantly targeted for Commercial Subscribers.
1.5 "Commercial Subscribers" shall mean those EchoStar Subscribers
who are activated by EchoStar to receive Music Channels at retail, business,
office or other commercial locations.
1.6 "Commercial Subscriber Fees" shall have the meaning given to such
term in Section 2.7(a) of this Agreement.
1.7 "EchoStar Indemnities" shall mean EchoStar, its Affiliated
Entities, its EchoStar Sales Agents, its contractors, subcontractors and
authorized distributors, agents and programming suppliers, and the partners,
directors, officers, employees and agents of EchoStar, its Affiliated Entities,
its EchoStar Sales Agents, its subcontractors, distributors, agents and
programming suppliers.
1.8 "EchoStar Sales Agents" shall mean those persons or entities
authorized by EchoStar to solicit video, audio and data programming services
delivered via the EchoStar System, with the exception of Muzak and the
Participating Muzak Affiliates.
1.9 "EchoStar Subscriber" shall mean a commercial or residential
subscriber activated by EchoStar to receive audio, video and/or data programming
services via the EchoStar System.
1.10 "EchoStar System" shall mean the direct broadcast satellite
delivery system utilized by EchoStar and located at a 119 degrees orbital slot
assignment with 12.2 to 12.7 GHz downlink frequencies, and authorized by the
Federal Communications Commission ("FCC") for delivery of multi-channel digital
audio, video and data services.
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 3
________________________________________________________________________________
1.11 "EchoStar's Uplink Facility" shall mean EchoStar's satellite
uplink and broadcast center located in Cheyenne, Wyoming that serves the
function of uplinking satellite signals to the EchoStar System.
1.12 "Exclusive Muzak Territories" shall have the meaning given to
such term in Section 9.4 of this Agreement.
1.13 "Force Majeure" shall mean an event described in Section 10.8 of
this Agreement.
1.14 "Indemnified Party" shall mean a party seeking indemnification
pursuant to Section 8.3 of this Agreement.
1.15 "Indemnifying Party" shall mean a party from whom indemnification
is sought pursuant to Section 8.3 of this Agreement.
1.16 "Music Channels" shall mean Commercial Music Channels and
Residential Music Channels, as more fully described in Section 2.1, which in any
event shall exclude the Exclusive Muzak Channels (as defined in the Uplink
Agreement). The Music Channels may be in mono or stereo sound, as determined by
EchoStar in its sole discretion.
1.17 "Music Subscribers" shall mean Residential Subscribers and
Commercial Subscribers.
1.18 "Muzak" shall have the meaning given to such term in the
introductory paragraph of this Agreement, and shall be deemed to include owned
Muzak Affiliates, except where circumstances otherwise require or where it would
not be logical to infer such inclusion.
1.19 "Muzak Affiliates" shall mean those existing owned and
independent operators at the effective date of this Agreement, their successors,
assignees and transferees as permitted by Muzak, that have the exclusive right
to use the existing Muzak(R) trademark and certain other existing trademarks of
Muzak, and to distribute subscription music services, adjunct services related
to the sequencing, changing and switching of music-program communications, and
certain adjunct services related to the delivery of advertising, data and video
communications, in Exclusive Muzak Territories.
1.20 "Muzak Affiliation Agreement" shall mean collectively the
franchise agreement and the Participating Affiliate Agreement between Muzak and
an independent Muzak Affiliate.
1.21 "Muzak Indemnities" shall mean Muzak, the Participating Muzak
Affiliates, its Affiliated Entities, its contractors, subcontractors and
authorized distributors and agents, and
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 4
________________________________________________________________________________
the partners, directors, officers, employees and agents of Muzak, the
Participating Muzak Affiliates, such Affiliated Entities, subcontractors,
distributors and agents.
1.22 "Muzak Services" shall mean the Music Channels and the Exclusive
Muzak Channels (as defined in the Uplink Agreement).
1.23 "Other Party" shall have the meaning given to such term in
Section 9.2 of this Agreement.
1.24 "Participating Muzak Affiliate" shall mean a Muzak Affiliate that
executes a Participating Affiliate Agreement with Muzak, which thereby shall
become a part of the Muzak Affiliation Agreement.
1.25 "Participating Affiliate Agreement" shall mean the agreement
between Muzak and an independent Muzak Affiliate pursuant to which Muzak obtains
Affiliate Consent and which agreement shall require Participating Muzak
Affiliates to comply with all terms and conditions in this Agreement, the Video
Agreement and the Uplink Agreement, applicable to Participating Muzak
Affiliates.
1.26 "Performance Right Fees" shall have the meaning given to such
term in Section 2.3(a) of this Agreement.
1.27 "Residential Music Channels" shall mean the Music Channels
programmed by Muzak which are predominantly targeted for Residential
Subscribers.
1.28 "Residential Subscriber Fee" shall have the meaning given to such
term in Section 2.2 of this Agreement.
1.29 "Residential Subscribers" shall mean EchoStar Subscribers who are
activated by EchoStar to receive Music Channels at their homes.
1.30 "Second Satellite Launch" shall mean the initial date on which
EchoStar commences transmission of the Video Services or Muzak Services on a
second EchoStar System satellite, which date shall in no event be later than
December 31, 1997.
1.31 "Service Launch" shall mean the initial date on which EchoStar
commences transmission of the Music Channels for revenue-generating purposes,
which date shall in no event be later than October 31, 1996.
1.32 "Subscriber Fees" shall mean Residential Subscriber Fees and
Commercial Subscriber Fees.
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 5
________________________________________________________________________________
1.33 "Term" shall mean the duration of this Agreement, as set forth in
Section 9.1 hereof.
1.34 "Territory" shall mean the footprint of the EchoStar System,
subject to any international, foreign, Federal, state, local or municipal,
conventions, treaties, laws, statutes, regulations, rules, ordinances or codes,
or prohibitions contained in programming agreements, which otherwise limit or
restrict EchoStar's right or ability to deliver any audio, video or data
programming services via the EchoStar System for receipt in any given
jurisdiction.
1.35 "Third Party Claim" shall mean any claim, assessment, action,
suit, audit or proceeding by a third party in respect of which indemnity may be
sought pursuant to Section 8 of this Agreement.
SECTION 2. PROGRAMMING AND TRANSMISSION OF MUSIC CHANNELS
2.1 Music Channels.
--------------
(a) Muzak will provide EchoStar with a multi-channel, digital,
music service as described in 2.1(b) for distribution over the EchoStar System
(the "Music Channels"). Subject to the terms and conditions of this Agreement
(including Affiliate Consent required pursuant to Section 9.4) and the on-going
rights of Muzak and Muzak Affiliates to distribute the Music Channels, Muzak
hereby grants to EchoStar the exclusive right and license to: (i) receive the
Music Channels from Muzak; (ii) transmit the signal of the Music Channels in a
digitally compressed, encrypted format, in mono or stereo sound as determined in
EchoStar's discretion, via the EchoStar System; (iii) activate and deactivate
consumer equipment (IRDs) for exhibition of the Music Channels as transmitted
via the EchoStar System to Residential Subscribers and Commercial Subscribers;
(iv) brand the Music Channels as EchoStar deems appropriate in its sole
discretion; and (v) offer and sell subscriptions to the Music Channels and
conduct customer service functions. Muzak represents and warrants (subject to
Affiliate Consent required pursuant to Section 9.4 below) that it has all rights
necessary to grant EchoStar the right to transmit the Music Channels to
Residential Subscribers and Commercial Subscribers.
(b) Effective upon Service Launch, and until the Second
Satellite Launch, the Music Channels will consist of thirteen (13) Commercial
Music Channels and fourteen (14) Residential Music Channels. Effective upon the
Second Satellite Launch, the Music Channels will consist of thirty (30) Music
Channels.
(c) The Music Channels shall not include the Environmental (R)
or FM-One(R) channels. Subject to Section 2.1(b), Muzak shall, in the exercise
of its sole discretion, be solely responsible for the programming and format of
the Music Channels; provided, however, that (i) EchoStar will have the right to
propose and to approve the format of each new
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 6
________________________________________________________________________________
Music Channel prior to its inclusion in the Music Channels, and (ii) EchoStar
may require Muzak to change the format of any Music Channel, and Muzak shall
effect any such change at no charge to EchoStar prior to the Second Satellite
Launch and for a fee of [**] per change after the Second Satellite Launch.
Notwithstanding the exclusivity of the Exclusive Muzak Channels, the Music
Channels may include channels with a similar tone or content as, but not
identical to, any of the Exclusive Muzak Channels, with the exception of the
Environmental(R) Channel. Such similar channels shall in no event utilize or
duplicate Muzak's proprietary Stimulus Progression(R) or Quantum Modulation(R)
techniques.
(d) All ownership, right, title and interest of any nature in
and to all or any part of the Music Channels and the programming contained
therein is vested exclusively in Muzak and neither EchoStar nor any EchoStar
Sales Agents shall have any right, title or interest in or to all or any part of
the Music Channels or the programming contained therein, except as specifically
licensed under this Agreement.
(e) EchoStar shall be entitled to package and brand the Music
Channels in any manner it chooses for distribution to Residential Subscribers
and Commercial Subscribers.
(f) The parties acknowledge that each Music Channel shall be
deemed to have a value of [**]. If for any reason EchoStar prices the Music
Channels at a higher rate, resulting in an increase in the Performance Right
Fees payable by Muzak hereunder as of the date this Agreement is executed,
EchoStar shall pay such increase.
2.2 Subscriber Fees for Residential Subscribers. EchoStar shall pay
-------------------------------------------
to Muzak a monthly programming fee of [**] per Music Channel per Residential
Subscriber (the "Residential Subscriber Fee"). The Residential Subscriber Fee is
only payable after EchoStar collects payment for the Music Channels from the
applicable Residential Subscriber for the applicable month.
2.3 Delivery of the Music Channels.
------------------------------
(a) Muzak shall be responsible for all costs of programming,
production, playback and transmission of the Music Channels to EchoStar's Uplink
Facility. Except as provided herein in Section 2.1(f) above and in Section 2.3
of the Uplink Agreement, Muzak shall be responsible for the cost of copyright,
royalty or other performance rights payments through to the viewer, including,
without limitation, payments to ASCAP, BMI, SESAC and any other applicable music
performance society or other applicable entity (collectively referred to as
"Performance Right Fees") with respect to the sale of all Music Channels to any
Residential Subscribers; provided, however, that in the event that at any time
during the term of this Agreement, Performance Right Fees exceed the Residential
Subscriber Fee, EchoStar shall pay such excess. EchoStar and the EchoStar Sales
Agents shall be independently responsible for
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 7
________________________________________________________________________________
collecting and remitting all Performance Right Fees, with respect to the sale of
any Music Channels to a Commercial Subscriber by EchoStar or EchoStar Sales
Agents, and EchoStar acknowledges that Muzak has no responsibility for such
Performance Rights Fees.
2.4 Additional Equipment. Muzak shall be responsible for any
--------------------
equipment (including the Mpeg Audio Encoder Boards) necessary for EchoStar to
receive and uplink the Music Channels at the point the Music Channels exit the
Mpeg Audio Encoder Boards, other than equipment which EchoStar currently
utilizes for receiving and uplinking signals to the EchoStar System.
2.5 Cost of Transmission. Except as provided to the contrary in
--------------------
Section 2.4 above, EchoStar shall be responsible for all costs of transmission
of the Music Channels from EchoStar's Uplink Facility to the EchoStar System and
to EchoStar Subscribers.
2.6 Rate Cards. EchoStar shall be responsible for setting rate cards
----------
for the sale of the Music Channels to EchoStar Subscribers by EchoStar Sales
Agents, and EchoStar shall be responsible for enforcing rate cards applicable to
sales of the Music Channels to EchoStar Subscribers by EchoStar Sales Agents.
The packaging and pricing of the Music Channels by EchoStar and EchoStar Sales
Agents to EchoStar Subscribers will be decided by EchoStar, in its sole
discretion.
2.7 Distribution of the Music Channels by EchoStar or EchoStar Sales
----------------------------------------------------------------
Agents to Commercial Subscribers.
- --------------------------------
(a) EchoStar will pay to Muzak and Participating Muzak
Affiliates, as applicable, each month a fee per each Commercial Subscriber in an
amount equal to [**] of Commercial EchoStar Collections (the "Commercial
Subscriber Fee") for any sales of the Music Channels to Commercial Subscribers
by EchoStar or EchoStar Sales Agents in such entity's Exclusive Muzak Territory.
(b) "Commercial EchoStar Collections" means the recurring
monthly charges collected from a Commercial Subscriber for the provision of the
Music Channels on the EchoStar System by EchoStar or EchoStar Agents.
"Commercial EchoStar Collections" shall not include any amounts collected from
Commercial Subscribers: (i) for sound system or video equipment lease, purchase,
installation or maintenance; (ii) for Performance Right Fees with respect to the
Music Channels; and (iii) any applicable sales, use or excise taxes with respect
to the Music Channels.
2.8 Discontinuation of Music Channels. EchoStar may, at any time, by
---------------------------------
giving sixty (60) days' prior written notice to Muzak, discontinue the uplink
and distribution of the Music Channels. Upon such discontinuation, EchoStar
shall purchase the equipment referred
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 8
________________________________________________________________________________
to in Section 2.4 above by payment to Muzak of the depreciated book value of
such equipment (which the parties agree to have a deemed value of [**],
allocating depreciation on a straight-line basis over five years.
2.9 Control Over System. Notwithstanding anything to the contrary in
-------------------
this Agreement, EchoStar shall always be entitled to exercise control over all
aspects of the EchoStar System, including any programming or other material
provided by Muzak, but only to the minimum extent EchoStar is required to do so
by Federal Communications Commission or similar law, rule or regulation.
SECTION 3. VIDEO AGREEMENT AND UPLINK AGREEMENT
3.1 Video Agreement. Contemporaneous with the execution of this
---------------
Agreement, the parties have executed the Video Agreement, which permits Muzak
and Participating Muzak Affiliates to solicit orders for, as an agent of
EchoStar, certain video programming packages at prices determined by EchoStar
and delivered via the EchoStar System.
3.2 Uplink Agreement. Contemporaneous with the execution of this
-----------------
Agreement, the parties have executed the Uplink Agreement, pursuant to which
EchoStar shall uplink and deliver the Muzak Services.
SECTION 4. PAYMENT TERMS, REPORTS AND AUDITS
4.1 Payment Schedule. All monthly Subscriber Fee payments required to
----------------
be made by EchoStar pursuant to Sections 2.2 and 2.7 shall be paid within forty
five (45) days of the end of each month during the term of this Agreement.
4.2 Reports. Together with the monthly Subscriber Fee payments
-------
required under Section 4.1 above, EchoStar shall submit to Muzak a report, which
reasonably details the amounts payable to Muzak and the Participating Muzak
Affiliates pursuant to this Agreement. Such reports shall include for each
applicable month: (i) the total number of Music Subscribers; (ii) the total
number of Residential Subscribers and Commercial Subscribers; (iii) the total
number of EchoStar Subscribers; (iv) the total number of Residential Subscribers
and Commercial Subscribers receiving free trial subscriptions to the Music
Channels; (v) the Music Channels ordered by such subscribers; and (vi) the
Commercial EchoStar Collections (including itemization) for each Commercial
Subscriber. The report shall reflect all Commercial EchoStar Collections during
the periods to which such payments pertain. In any event such report shall
contain such information as is required by the applicable performance rights
societies and other applicable entities. Muzak acknowledges and agrees that all
information provided by EchoStar to Muzak under this Section 4.2 is deemed
proprietary to EchoStar, and Muzak represents and
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 9
________________________________________________________________________________
agrees that it will treat all such information confidential as required by
Section 10.7(a) of this Agreement.
4.3 Collection of Billings. EchoStar shall be solely responsible for
----------------------
all billing and collection of: (i) fees charged to Residential Subscribers for
Music Channels distributed by EchoStar or EchoStar Sales Agents; and (ii) fees
charged to Commercial Subscribers for Music Channels distributed by EchoStar or
EchoStar Sales Agents, and EchoStar shall undertake such billing and collection
activities in accordance with its customary prevailing practices and in the
exercise of reasonable and prudent business judgment. Notwithstanding anything
to the contrary herein, EchoStar may offer free trials of the Music Channels for
periods of up to thirty (30) days or such other trial period as mutually agreed
to by Muzak and EchoStar from time to time, which free trials shall be excluded
from the payment calculation in Section 2.7 above.
4.4 Late Payments. In the event that any overdue balances are ever
-------------
owed by EchoStar to Muzak, late charges shall be assessed on a monthly basis at
the rate of 1.5% of the outstanding balance per month or the maximum amount
allowed by law, whichever is lower. Notwithstanding the above, EchoStar shall
have one (1) late payment of no more than ten (10) days following the date upon
which such amount was due in any calendar year without incurring late payment
charges with respect to such payment due.
4.5 Subscriber Cancellations. Muzak understands that any Music
------------------------
Channels which are cancelled by a subscriber, or for which a credit is issued,
shall effect a pro rata reduction in Subscriber Fees paid or payable to Muzak
and/or the applicable Participating Muzak Affiliate, to be assessed as a charge
back to Muzak and/or the applicable Participating Muzak Affiliate, which charge
back may be offset against any money due to Muzak and/or the applicable
Participating Muzak Affiliate from EchoStar or otherwise to be reimbursed by
Muzak and/or the applicable Participating Muzak Affiliate, as applicable, to
EchoStar.
4.6 Multi-Month Payments. In the case of multi-month subscriptions,
--------------------
Subscriber Fees will be paid monthly as the Music Channels are provided, even if
a multi-month payment is received by EchoStar.
4.7 Muzak Audit Rights.
------------------
(a) EchoStar shall keep complete and accurate books and records
of all EchoStar Subscriber accounts. During the term of this Agreement and for a
period of one (1) year thereafter, Muzak or its designated representative may,
in its reasonable discretion, on at least ten (10) days' advance written notice,
not more than once in any twelve (12) month period, at EchoStar's offices, at
reasonable times within regular business hours approved by EchoStar, which
approval shall not be unreasonably withheld, and at Muzak's sole cost and
expense, inspect and audit such books and records, provided that such inspection
and audit shall be no
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 10
________________________________________________________________________________
more extensive than is required to verify that EchoStar's payments to Muzak and
the Participating Muzak Affiliates have been properly computed in accordance
with the terms of this Agreement. Muzak shall not assess EchoStar for amounts
found, as a result of such audit, to be owing thereafter if such amounts relate
to a reporting period that ended more than two (2) years prior to the date such
audit commenced. In the event that any audit undertaken by Muzak results in a
determination that there has been either an underpayment or overpayment of the
amounts due Muzak or any Participating Muzak Affiliate hereunder, then within
thirty (30) days after such determination, Muzak and/or the Participating Muzak
Affiliate, or EchoStar, as the case may be, shall pay to the other the amount of
such underpayment or overpayment, plus simple interest accrued on a daily basis
from the date payment was due to the date of payment, at the prime rate of the
Union Bank of Switzerland, New York Branch, in effect at the time of payment.
Muzak shall bear all costs related to an audit of EchoStar's books and records,
except if such audit reveals an underpayment in excess of five percent (5%) for
all payments in the aggregate in the applicable period audited, in which case
EchoStar shall pay Muzak's reasonable expenses related to the audit.
(b) During any audit hereunder, Muzak or its designated
representative (at Muzak's cost and expense) may make copies of only those books
and records relating to Subscriber accounts of EchoStar that are necessary for
the verification of statements and accountings to Muzak and Participating Muzak
Affiliates and that were physically examined as part of the audit. Muzak shall
provide EchoStar with a copy of the audit report so EchoStar can verify the
results of the audit. Muzak acknowledges and agrees that all information
disclosed or made available by EchoStar during the course of an audit by Muzak
is proprietary to EchoStar. Muzak shall take reasonable precautions to
safeguard the confidentiality of all such information, including, without
limitation, any copies thereof (and in any event Muzak shall exercise the same
precautions it uses to safeguard its own confidential and proprietary
information) and shall destroy any such copies upon the mutually-confirmed
completion of the audit and payment in full of any fees and other charges
determined to be owing as a result of such audit. Muzak shall not, during the
Term or at any time thereafter, use any information disclosed or made available
by EchoStar in the course of an audit by Muzak for any purpose whatsoever except
to verify that EchoStar's payments have been properly computed in accordance
with the terms of this Agreement.
(c) In the event that a party disputes the results of an audit,
the parties shall attempt to resolve the matter by conducting a new audit under
the joint supervision of their respective independent certified public
accountants. In the event that such new audit resolves the dispute, the cost of
each party's independent certified public accountants shall be borne by such
party. In the event that such new audit fails to resolve the dispute, the matter
shall be resolved by binding arbitration in Denver, Colorado under the then
applicable rules of the American Arbitration Association and the prevailing
party shall be reimbursed by the other party for all of its costs of the second
audit and for its reasonable attorneys fees.
<PAGE>
DBS PROGRAMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 11
________________________________________________________________________________
SECTION 5. MUZAK'S TRADEMARKS
5.1 EchoStar and EchoStar Sales Agents shall not use any of Muzak's
trademarks, trade names or service marks without the prior written consent of
Muzak (which consent shall be subject to the exclusive rights of Muzak
Affiliates to any such trademark, trade name or service mark). All rights to
Muzak's trademarks, trade names or service marks shall remain vested in Muzak
following any termination of this Agreement, and EchoStar acknowledges that
neither it nor any of the EchoStar Sales Agents shall have any rights therein.
If consent has been granted by Muzak for EchoStar to use a Muzak Trademark, and
if EchoStar submits an example of its intended use of a Muzak trademark, Muzak
shall approve or reject such example within five (5) days, otherwise the example
shall be deemed approved for use by EchoStar.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Mutual Representations, Warranties and Covenants.
------------------------------------------------
Each of the parties represents, warrants and covenants to the other that:
(i) it has full power and authority to enter into and fully perform its
obligations under this Agreement (with respect to Muzak, however, subject to
Affiliate Consent required pursuant to Section 9.4 below); (ii) it has not and
will not during the Term enter into an agreement or arrangement which limits the
full performance of its obligations hereunder; (iii) it is and will remain in
full compliance with all applicable local, state and Federal laws and
regulations, including but not limited to such statutes, laws, rules,
regulations and orders enforced, administered, promulgated or pronounced by the
FCC; (iv) the execution of this Agreement by it will not: (a) result in any
breach of, or constitute a default under, any contract, agreement, corporate
charter, bylaw, or other instrument or agreement to which it is a party or by
which it or its property may be bound or affected, or (b) require the consent of
any third party (with respect to Muzak, however, subject to Affiliate Consent
required pursuant to Section 9.4 below); (v) it has obtained, and shall maintain
in full force during the Term, such Federal, state and local authorizations as
are necessary to operate the business it is conducting in connection with its
rights and obligations under this Agreement; (vi) it is under no obligation and
will not become subject to any obligation that might interfere with its
performance of this Agreement (with respect to Muzak, however, subject to
Affiliate Consent required pursuant to Section 9.4 below); and (vii) it will
comply with all of its representations, warranties, obligations, covenants and
responsibilities herein contained. All representations, warranties and
covenants made hereunder shall survive the execution of this Agreement.
6.2 Muzak Content Warranties and Covenants. Muzak warrants and
--------------------------------------
covenants that the Music Channels will not be defamatory or obscene and they
will not contain any material which violates any copyright, right of privacy or
literary or dramatic right of any person or entity. Subject to EchoStar's
obligations under Sections 2.1(e) and 2.3 hereof, Muzak warrants
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 12
________________________________________________________________________________
that all applicable payments for Performance Right Fees will be paid by Muzak
during the Term, with respect to the sale of all Music Channels to any
Residential Subscribers.
SECTION 7. NONCOMPETITION
7.1 Muzak Competitors. During the Term, EchoStar shall not, directly
-----------------
or indirectly, within the Territory: (i) provide transponder space to; (ii)
enter into or maintain distributor agreements or relationships with; or (iii)
enter into any agreement for the programming or delivery of any audio services
via DBS frequencies (12.2 ghz. to 12.7 ghz.) with, the following competitors of
Muzak in the sale of commercial music services: [**]. Muzak acknowledges and
understands that an Affiliated Entity of EchoStar currently has an agreement
with [**] for the distribution of audio services via frequencies outside of the
12.2 ghz. to 12.7 ghz. bandwidth, and further acknowledges and agrees that such
relationship is not a violation of this Section 7.1.
7.2 EchoStar Competitors. During the Term, Muzak shall not, directly,
--------------------
or indirectly, within the Territory: (i) secure transponder space for; (ii)
enter into or maintain distribution agreements or relationships with; or (iii)
enter into any agreement for the programming or delivery of any Muzak Services
with (A) any entity which delivers video, audio and/or data via DBS frequencies
(12.2 ghz. to 12.7 ghz.) or any affiliate, successor or assign of any such
entity; or (B) [**].
SECTION 8. INDEMNIFICATION
8.1 Indemnification by Muzak. Muzak shall indemnify and hold
------------------------
harmless the EchoStar Indemnities from, against and with respect to any and all
claims, damages, liabilities, costs and expenses (including reasonable
attorneys' and expert's fees) (collectively "Damages") incurred in connection
with any claim against any of the EchoStar Indemnities arising out of: (i)
Muzak's breach of any provision of this Agreement; (ii) material (including
advertising or promotional copy) or programming supplied by Muzak pursuant to
this Agreement to the extent that EchoStar Indemnities have not modified,
altered or edited such material or programming, or interrupted the distribution
of such material or programming without Muzak's prior written consent; (iii) the
distribution or cablecast of any programming included in the Music Channels
which violates any right of privacy or which is defamatory or obscene in nature,
or requires payment for any Performance Right Fees, to the extent the payment of
such Performance Right Fees are the responsibility of Muzak hereunder; and/or
(iv) Muzak's advertising and marketing of the Music Channels. In addition, Muzak
shall indemnify and hold the EchoStar Indemnities harmless from any Federal,
state or local taxes or fees that are based upon revenues derived by, or the
operations of, Muzak. Notwithstanding anything to the contrary herein or
otherwise, in
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 13
________________________________________________________________________________
no event shall Muzak have any liability to EchoStar, the EchoStar Indemnities or
any other person or entity arising out of, relating to or resulting from the
acts or omissions of Muzak's independent Muzak Affiliates, under this Agreement.
8.2 Indemnification by EchoStar. EchoStar shall indemnify and hold
---------------------------
harmless the Muzak Indemnities from, against and with respect to any and all
Damages incurred in connection with any claim against any of the Muzak
Indemnities arising out of: (i) EchoStar's breach of any provision of this
Agreement; (ii) EchoStar's advertising and marketing of the Music Channels
(except for advertising and marketing materials supplied by or approved in
writing by Muzak); and (iii) Performance Right Fees with respect to the sale of
the Music Channels to Commercial Music Subscribers by EchoStar or by EchoStar
Sales Agents or which are otherwise the responsibility of EchoStar hereunder.
In addition, EchoStar shall pay and hold the Muzak Indemnities harmless from any
Federal, state or local taxes or fees that are based upon revenues derived by,
or the operation of, EchoStar. Notwithstanding anything to the contrary herein
or otherwise, in no event shall EchoStar have any liability to Muzak, the Muzak
Indemnities or any other person or entity arising out of, relating to or
resulting from the acts or omissions of the EchoStar Sales Agents.
8.3 Indemnification Procedures. Should either party wish to assert a
--------------------------
claim for indemnification (a "Third Party Claim"), such party (the "Indemnified
Party") shall do so by promptly notifying the other party (the "Indemnifying
Party") in writing of such claim. The Indemnifying Party shall undertake the
defense of any Third Party Claim and permit the Indemnified Party to participate
therein at the Indemnified Party's expense. The settlement of any Third Party
Claim by an Indemnified Party, without the Indemnifying Party's prior written
consent, shall release the Indemnified Party from its obligations hereunder with
respect to such Third Party Claim so settled.
SECTION 9. TERM AND TERMINATION
9.1 Term. This Agreement shall commence on the date of execution by
----
both EchoStar and Muzak and shall continue until the expiration of the useful
life of the EchoStar System satellite on which EchoStar has allocated 2.4
megahertz of transponder capacity to Muzak for carriage of the Exclusive Muzak
Channels, unless and until this Agreement is terminated as provided in this
Section 9.
9.2 Termination Upon Default. This Agreement may be terminated by a
------------------------
party (the "Affected Party"), in accordance with the procedures set forth in
Section 9.3 below, upon the occurrence of any of the following with respect to
the other party (the "Other Party"):
(a) The Other Party loses any Federal Communications Commission,
broadcast, performance or other similar license rights necessary to deliver the
services to be
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 14
________________________________________________________________________________
provided to the Affected Party under the terms of this Agreement, and such
default is not cured within sixty (60) days of receipt of written notice from
the Affected Party (or if such default cannot reasonably be cured by the Other
Party within such sixty (60) days, if such cure has been initiated by the Other
Party and the Other Party is diligently continuing to cure within that time, the
Other Party's opportunity to cure such default shall be extended for a period
not to exceed an additional thirty (30) days).
(b) The Other Party (which for purposes of this Section 9.2(b)
shall mean EchoStar alone) commits a payment default which is not: (i) cured
within sixty (60) days of receipt of written notice from the Affected Party; or
(ii) reserved against in accordance with the escrow procedures outlined in
Section 9.3 below.
(c) The Other Party (which, for purposes of this Section 9.2(c)
shall mean EchoStar alone) (i) is unable to launch the Muzak Services on the
first EchoStar System satellite by October 31, 1996 or (ii) is unable to launch
a second EchoStar System satellite by December 31, 1997 (unless EchoStar then
allocates, or has allocated, 2.4 megahertz of transponder capacity to Muzak for
carriage of the Exclusive Muzak Channels on the first EchoStar System
satellite), in each case, including without limitation due to the failure to
accomplish Service Launch or due to satellite failures, and such default is not
cured within sixty (60) days of receipt of written notice from the Affected
Party (or if such default cannot reasonably be cured by the Other Party within
such sixty (60) days, if such cure has been initiated by the Other Party and the
Other Party is diligently continuing to cure within that time, the Other Party's
opportunity to cure such default shall be extended for a period not to exceed an
additional thirty (30) days).
(d) The Other Party defaults on a material obligation or
breaches a material representation or warranty in this Agreement or in the Video
Agreement, the Uplink Agreement, or the Trademark License Agreement referred to
in Section 8.1(a) of the Video Agreement, and such default or breach is not
cured within sixty (60) days of receipt of written notice from the Affected
Party (or if such default or breach cannot be reasonably cured by the Other
Party within sixty (60) days, if such cure has been initiated by the Other Party
and the Other Party is diligently continuing to cure within that time, the Other
Party's opportunity to cure such default or breach shall be extended for a
period of time not to exceed an additional thirty (30) days. A default or breach
under this Agreement shall also give rise to a default under the Video Agreement
and the Uplink Agreement.
(e) If the Other Party files bankruptcy, has an involuntary
petition in bankruptcy filed against it (which petition is not dismissed within
forty five (45) days after filing), is insolvent, makes an assignment for the
benefit of creditors or has a trustee appointed to manage the affairs of the
Other Party.
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 15
________________________________________________________________________________
9.3 Termination Procedure. The Affected Party may exercise its
---------------------
termination rights pursuant to Section 9.2 only by giving the Other Party a
notice of termination delivered in conformance with Section 10.1 of this
Agreement. Such notice shall specify the basis of termination, and shall
specify the applicable cure period. In the event of a payment default, the
Other Party may, within the sixty (60) days cure period referred to in Section
9.2(b) above, escrow the disputed amount with an escrow agent acceptable to the
Affected Party, and notify the Affected Party (in conformance with Section 10.1
of this Agreement) that it has done so. If such disputed amount is deposited in
escrow in accordance with the prior sentence, the parties shall seek to promptly
resolve such dispute in the manner set forth in Section 10.9 and the escrow
agent shall be instructed to disburse the disputed amount only upon receipt of
written instructions signed by both Muzak and EchoStar. Deposit of the disputed
amount in escrow will stay termination of this Agreement until the dispute is
resolved by the parties in the manner set forth in Section 10.9 or the parties
determine that the dispute cannot be resolved in accordance with Section 10.9.
Any dispute regarding whether a termination is effective shall be resolved in
the manner set forth in Section 10.9.
9.4 Consent of Muzak Affiliates. Nothing in this Agreement shall be
---------------------------
binding on any Muzak Affiliate until such time as such Muzak Affiliate executes
the Participating Affiliate Agreement and the EchoStar Dealer Agreement (as
defined in the Video Agreement), and then only to the extent set forth in such
Participating Affiliate Agreement and the EchoStar Dealer Agreement. The
parties hereby acknowledge that Muzak Affiliates have certain exclusive rights
to distribute certain Muzak Services in their respective areas (the "Exclusive
Muzak Territories"), and that the provision of the Music Channels under the
terms of this Agreement and the grant of certain rights to EchoStar to
distribute certain of the Muzak Services may conflict with those exclusive
rights. Accordingly, the performance of this Agreement by Muzak is hereby
conditioned upon the prior written consent of all Muzak Affiliates ("Affiliate
Consent"), which consent will be solicited by Muzak promptly upon execution of
this Agreement. If Muzak fails to obtain Affiliate Consent within thirty (30)
days after the execution of this Agreement, Muzak may terminate this Agreement
within ten (10) days thereafter by providing written notice to EchoStar, and the
Video Agreement and the Uplink Agreement shall also automatically terminate as
of the effective date of termination of this Agreement. If Muzak elects not to
terminate this Agreement, notwithstanding that Muzak fails to obtain Affiliate
Consent, Muzak hereby agrees to indemnify and hold harmless the EchoStar
Indemnities from, against and with respect to any and all Damages incurred in
connection with any claim by any Muzak Affiliate against any of the EchoStar
Indemnities arising out of Muzak's failure to obtain Affiliate Consent.
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 16
________________________________________________________________________________
9.5 Post-Termination Service.
------------------------
(a) Upon any termination of this Agreement, all subscription
agreements to the Music Channels sold by EchoStar or EchoStar Sales Agents shall
remain the exclusive property of EchoStar.
(b) Upon termination of this Agreement by Muzak pursuant to
Section 9.2(a), (d) or (e), EchoStar may request, and Muzak shall continue to
provide (subject to restrictions by law), the Music Channels to EchoStar
Subscribers for a period of six (6) months, at the same level that such Music
Channels were provided prior to termination. During such period, Muzak and the
Participating Muzak Affiliates (as applicable) shall be entitled to receive the
Commercial Subscriber Fees and the Residential Subscriber Fees, in accordance
with Section 4, as if this Agreement was in full force and effect. EchoStar
further may request and Muzak shall continue to provide (subject to restrictions
by law) the Music Channels to EchoStar Subscribers for an additional period of
three (3) months, at the same level that such Music Channels to were provided
prior to termination. During such additional three (3) month period, Muzak and
the Participating Muzak Affiliates (as applicable) shall be entitled to receive
[**] the compensation they would have been entitled to receive if this
Agreement was in full force and effect absent termination of this Agreement.
(c) Upon expiration or termination of this Agreement by EchoStar
pursuant to Section 9.1, 9.2(a), (d) or (e), EchoStar may request, and Muzak
shall continue to provide (subject to restrictions by law), the Music Channels
to EchoStar Subscribers for a period of twelve (12) months, at the same level
that such Music Channels were provided prior to termination or expiration.
Muzak and the Participating Muzak Affiliates, as applicable, shall be entitled
to receive the Commercial Subscriber Fees and Residential Subscriber Fees in
accordance with the provisions of Section 4, as if this Agreement was in full
force and effect.
(d) During the transition period set forth in Section 9.5(b)
above, and at any time after termination or expiration of this Agreement, either
party may negotiate and/or enter into agreements with any of the parties listed
in Section 7, as applicable, which it otherwise would be restricted from doing
so pursuant to Section 7 above.
(e) Muzak acknowledges and agrees that:
(i) all Residential Subscriber information (regardless of
whether the Subscriber has purchased Muzak Services); and
(ii) all Commercial Subscriber information to the extent
neither Muzak nor any Participating Muzak Affiliate has sold Muzak Services to
such Commercial Subscriber,
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 17
________________________________________________________________________________
including but not limited to names, addresses and profiles, are proprietary to,
and the exclusive property of, EchoStar. During the term of this Agreement
Muzak and the Participating Muzak Affiliates shall use that information only to
the extent required for their performance of this Agreement, or as specifically
permitted pursuant to this Agreement. Following expiration of the Agreement
neither Muzak nor any Participating Muzak Affiliate shall use any such
information for any reason, except to the extent specifically permitted above,
and for example but not by limitation, at no time either during the term of this
Agreement or following expiration thereof, shall Muzak or any Participating
Muzak Affiliate sell or otherwise provide that information to any third parties,
or use that information to solicit subscribers to subscribe to any other
programming service.
(f) EchoStar acknowledges and agrees that with respect to
Commercial Subscribers which have been sold Muzak Services by either Muzak or a
Participating Muzak Affiliate, all Commercial Subscriber information, including
but not limited to names, addresses and profiles, are proprietary to, and the
exclusive property of, Muzak or the applicable Participating Muzak Affiliate.
During the term of this Agreement EchoStar and EchoStar Sales Agents shall use
that information only to the extent required for their performance of this
Agreement, or as specifically permitted pursuant to this Agreement. Following
expiration of this Agreement EchoStar and EchoStar Sales Agents shall not use
any such information for any reason, except to the extent specifically permitted
above, and for example but not by limitation, at no time during the term of this
Agreement shall EchoStar or EchoStar Sales Agents sell or otherwise provide that
information to any third parties, and at no time either during the term of this
Agreement or following termination shall EchoStar or EchoStar Sales Agents use
that information to solicit subscribers to subscribe to any other programming
service.
EchoStar, Muzak and the Muzak Affiliates agree that with respect to any
Commercial Subscriber not falling into one of the above categories, upon, and at
any time after, expiration of this Agreement, either party may solicit the
Commercial Subscriber to purchase any services, subject to a party's rights in
existing contracts.
The solicitation or sale of any services to any subscriber by Muzak or a
Participating Muzak Affiliate, on the one hand, or EchoStar or an EchoStar Sales
Agent, on the other hand, shall not be deemed to violate this Section if
proprietary subscriber information of the other party (as described in this
Section) is not used in connection with such solicitation or sale.
(g) The parties acknowledge that, in the event of any actual or
threatened breach of paragraph (e) or (f) above, EchoStar, in the case of
paragraph (e) and Muzak and Participating Muzak Affiliates, in the case of
paragraph (f), will suffer irreparable and ongoing harm which, while
substantial, will not be fully compensable by damages. As a consequence, in the
event of any actual or threatened breach of such provisions, the non-breaching
party may, in addition and supplementary to any and all other rights and
remedies existing in its favor,
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 18
________________________________________________________________________________
obtain immediate and ongoing injunctive relief, enjoining or restraining
whatever violation may have occurred or be occurring or may have been
threatened. This injunctive relief shall be in the form of a temporary
restraining order, preliminary injunction or similar relief, and a permanent
injunction, as may be sought by the non-breaching party.
9.6 Limitation of Liability.
-----------------------
(a) Upon expiration or in the event this Agreement terminates or
is terminated for any reason set forth herein, if EchoStar is not in breach of
this Agreement, then EchoStar and its Affiliated Entities shall have no
liability or obligation to Muzak whatsoever, and for example, but not by way of
limitation, Muzak shall have no right to require EchoStar to continue to
distribute the Music Channels. Muzak agrees that upon expiration or in the event
of termination of this Agreement for any reason, if EchoStar is not in breach of
this Agreement, no amounts spent in its fulfillment will be recoverable by Muzak
from EchoStar or any of its Affiliated Entities.
(b) Upon expiration or in the event this Agreement terminates or
is terminated for any reason set forth herein, if Muzak is not in breach of this
Agreement, then Muzak and its Affiliated Entities shall have no liability or
obligation to EchoStar whatsoever, and for example, but not by way of
limitation, EchoStar shall have no right to require Muzak to continue to permit
EchoStar to distribute the Music Channels (except as required pursuant to
Section 9.5 above). EchoStar agrees that upon expiration or in the event of
termination of this Agreement for any reason, if Muzak is not in breach of this
Agreement, no amounts spent in its fulfillment will be recoverable by EchoStar
from Muzak or any of its Affiliated Entities.
(c) Notwithstanding any provision in this Agreement to the contrary,
under no circumstances shall either party be liable to the other party for
exemplary, special, incidental or consequential damages, including, without
limitation, any payment for lost business, future profits, loss of goodwill,
reimbursement for expenditures or investments made or commitments entered into,
creation of clientele, advertising costs, termination of employees or employees'
salaries, or overhead or facilities incurred or acquired based upon the business
derived or anticipated under this Agreement.
9.7 Survival of Terms. The rights and obligations pursuant to
-----------------
Sections 4, 5, 6, 8, 9.5, 9.6, 9.7, 10.4 and 10.7 shall survive expiration or
termination of this Agreement. Any obligations of the parties arising prior to
termination shall survive termination of this Agreement and continue in full
force and effect until the same have been completely discharged.
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 19
________________________________________________________________________________
SECTION 10. MISCELLANEOUS
10.1 Notices. Except as set forth below, all notices hereunder shall
-------
be in writing and delivered by hand or sent by certified mail, return receipt
requested, overnight delivery service or by facsimile to the receiving party at
its address or facsimile number set forth below or as otherwise designated by
written notice. Notice to EchoStar shall be provided as follows:
EchoStar Satellite Corporation
90 Inverness Circle East
Englewood, Colorado 80112
Attention: Carl E. Vogel, Executive Vice President
and Chief Operating Officer
Fax: (303) 799-0354
with copy to: EchoStar Satellite Corporation
90 Inverness Circle East
Englewood, Colorado 80112
Attention: David K. Moskowitz, Vice President
and General Counsel
Fax: (303) 799-0354
Notice to Muzak shall be provided as follows:
Muzak Limited Partnership
2901 Third Avenue, Suite 400
Suite 400
Seattle, WA 98121
Attention: President
Fax: (203) 623-6210
Notice given by mail shall be considered to have been given five (5) days after
the date of mailing, postage prepaid certified or registered mail. Notice given
by an overnight delivery service shall be considered to have been given on the
next business day. Notice given by facsimile shall be considered to have been
given on the date receipt thereof is confirmed during normal business hours,
with a hard copy to be mailed promptly thereafter.
10.2 Waiver. The failure of any party to insist upon strict
------
performance of any provision of this Agreement shall not be construed as a
waiver of any subsequent breach of the same or similar nature. All rights and
remedies reserved to either party shall be cumulative and shall not be in
limitation of any other right or remedy which such party may have at law or in
equity.
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 20
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10.3 Binding Agreement; Assignment. This Agreement shall be binding
-----------------------------
upon the parties hereto and their respective successors and assigns, except that
it may not be assigned (by transfer or by operation of law) by either party
without the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that either party may assign this
Agreement without the prior written consent of the other party in connection
with the sale of all or substantially all of its assets or equity interests
(including any sale of equity interests effected through a merger).
Notwithstanding the above, upon thirty (30) days prior written notice, either
party may assign this Agreement without the other party's consent to an
Affiliated Entity.
10.4 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Colorado applicable to contracts
made and fully performed therein by parties domiciled therein, without regard to
the conflicts of laws provisions thereof, except to the extent that the parties'
respective rights and obligations are subject to mandatory local, state and
federal laws or regulations.
10.5 Entire Agreement and Section Headings. This Agreement sets forth
-------------------------------------
the entire agreement and understanding of the parties relating to the subject
matter hereof. This Agreement shall not be modified other than in a writing,
signed by each of the parties hereto. The Section headings hereof are for the
convenience of the parties only and shall not be given any legal effect or
otherwise affect the interpretation of this Agreement.
10.6 Severability. The parties agree that each provision of this
------------
Agreement shall be construed as separable and divisible from every other
provision and that the enforceability of any one provision shall not limit the
enforceability, in whole or in part, of any other provision hereof. In the
event that a court of competent jurisdiction determines that a restriction
contained in this Agreement shall be unenforceable because of the extent of time
or geography, such restriction shall be deemed amended to conform to such extent
of time and/or geography as such court shall deem reasonable.
10.7 Confidentiality; Press Release.
------------------------------
(a) At all times during the Term and for a period of three (3)
years thereafter, the parties and their employees (and with respect to Muzak,
all Muzak Affiliates must agree in writing (through the Muzak Affiliation
Agreement or otherwise) to comply fully with all of the confidentiality
provisions of this Agreement prior to disclosure by Muzak of any information
regarding EchoStar, this Agreement and any other agreements between the parties
in any way related to this Agreement) will maintain, in confidence, the terms
and provisions of this Agreement, as well as all data, summaries, reports or
information of all kinds, whether oral or written, acquired or devised or
developed in any manner from the other party's personnel or files, and that they
have not and will not reveal the same to any persons not employed by the
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 21
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other party (with the exception of Muzak Affiliates, but solely for the purpose
of seeking Affiliate Consent, and to perform if Affiliate Consent is received)
except: (i) at the written direction of such party; (ii) to the extent necessary
to comply with law, the valid order of a court of competent jurisdiction or the
valid order or requirement of the Securities and Exchange Commission or any
successor agency thereto, in which event the disclosing party shall so notify
the other party as promptly as practicable (and, if possible, prior to making
any disclosure) and shall seek confidential treatment of such information; (iii)
as part of its normal reporting or review procedure to its parent company, its
auditors and its attorneys, and such parent company, auditors and attorneys
agree to be bound by the provisions of this Section 10.7; (iv) in order to
enforce any of its rights pursuant to this Agreement; (v) to Affiliated
Entities, potential investors, insurers and financing entities, and such
Affiliated Entities, potential investors, insurers and financing entities agree
to be bound by the provisions of this Section 10.7; and (vi) to the extent
necessary to permit the performance of obligations under this Agreement. At all
times during the term of this Agreement, EchoStar shall, and shall cause the
EchoStar Agents to, disclose the identity of Muzak as the source of the
Residential Services only with the prior written consent of Muzak, subject to
exceptions identified in the prior sentence. EchoStar will be a named third
party beneficiary of the agreements of Participating Muzak Affiliates to comply
with the terms of this provision.
(b) Promptly after the date of execution of this Agreement, the
parties shall use their reasonable best efforts to agree upon a mutually
acceptable press release with respect to the parties' general business
relationship under this Agreement and to jointly issue and release such press
release at a date and time mutually agreed upon.
10.8 Force Majeure.
-------------
(a) Neither EchoStar nor Muzak shall be responsible for any
failure or delay in the performance of any of their respective obligations under
this Agreement due to labor disputes, wars, riots, public disorders, acts of
God, labor dispute, natural disaster, technical failure (including the failure
of all or part of the domestic communications satellite, or transponders on
which the Muzak Channels are delivered by Muzak to EchoStar or by EchoStar to
EchoStar Subscribers, or of the related uplinking or other equipment) or any
other reason beyond the reasonable control of the party whose performance is
prevented during the period of such occurrence (any such event a "Force
Majeure"). The Term shall be suspended during the period when a party is unable
to fulfill its obligations hereunder by reason of such occurrence. In addition,
the Programming Fees payable by EchoStar shall be reduced on a prorated basis
if, by reason of Force Majeure, an EchoStar Subscriber receives the Residential
Service for less than a full month.
(b) If after launch of EchoStar's first DBS satellite a Force
Majeure event decreases the number of available operating transponders on the
EchoStar System, after
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHOSTAR
PAGE 22
________________________________________________________________________________
allocating transponder space to video programming suppliers to which EchoStar is
contractually obligated to allocate a specified number of channels, EchoStar
will then allocate remaining operating transponder space to Muzak on a pro rata
basis, taking into consideration the amount of bandwidth utilized to deliver the
Muzak Channels prior to such decrease in available operating transponders as a
percentage of all available bandwidth utilized to deliver all other programming
services (excluding those video programming suppliers to which EchoStar is
contractually obligated to allocate a specified number of channels).
10.9 Dispute Resolution.
------------------
(a) Initial Dispute Resolution Procedures. Any dispute or
-------------------------------------
disagreement between EchoStar and Muzak arising out of this Agreement shall be
resolved according to the following dispute resolution procedure. First, such
dispute shall be addressed to each party's project manager (or equivalent level
manager) for discussion and attempted resolution. If any such dispute cannot be
resolved by such project managers within five (5) business days after the date
that either party gives notice that such dispute or disagreement exists, then
such dispute shall be immediately referred to the respective presidents for
discussion and attempted resolution.
(b) Subsequent Dispute Resolution Procedures. If a dispute
----------------------------------------
cannot be resolved to the mutual satisfaction of both parties within five (5)
business days (or such longer period as may be mutually agreed upon) after the
second-tier referral described in Section 10.9(a) above, then such dispute shall
be submitted to binding arbitration in Seattle, Washington pursuant to the then
applicable rules of the American Arbitration Association.
10.10 Independent Contractors. The parties hereto acknowledge and agree
-----------------------
that the relationship established under the Agreement shall be that of
independent contractors. EchoStar and Muzak shall not be deemed partners or
joint venturers for one another for any purpose whatsoever.
10.11 Compliance with Law. The parties shall comply with, and agree
-------------------
that this Agreement is subject to, all applicable Federal, state and local laws,
rules and regulations, including, without limitation, all of the provisions of
the Communications Act of 1934 and all amendments thereto, now enacted or
hereafter promulgated in force during the term of this Agreement.
<PAGE>
DBS PROGRAMMING AFFILIATION AGREEMENT
MUZAK/ECHSOTAR
PAGE 23
________________________________________________________________________________
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
ECHOSTAR SATELLITE CORPORATION
By:__________________________________
Name:
Title:
MUZAK LIMITED PARTNERSHIP
By:/s/ John R. Jester
----------------------------------
Name: John R. Jester
Title: President
<PAGE>
Exhibit 10.9
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been
separately filed with the Commission.
VIDEO PROGRAMMING SALES AGENT AGREEMENT
VIDEO PROGRAMMING SALES AGENT AGREEMENT (the "Agreement"), made as of this
25th day of Dec., 1995, between EchoStar Satellite Corporation, a Colorado
- ---- ----
corporation ("EchoStar"), with offices at 90 Inverness Circle East, Englewood,
Colorado 80112, and Muzak Limited Partnership, a Delaware limited partnership
("Muzak"), with offices at 2901 Third Avenue, Suite 400, Seattle, Washington
98121.
RECITALS
A. EchoStar and Muzak, contemporaneous with the execution of this
Agreement, have entered into a DBS Programming Affiliation Agreement (the "DBS
Affiliation Agreement") and an Uplink Facility Agreement (the "Uplink
Agreement"), which DBS Affiliation Agreement and Uplink Agreement contemplated
the execution of this Agreement contemporaneous therewith; and
B. EchoStar is engaged in the business of, among other things, providing
direct broadcast satellite-delivered, multi-channel, digital video, audio and
data services to commercial and residential subscribers, itself and through its
authorized EchoStar Sales Agents (as hereinafter defined); and
C. Muzak is engaged in the business of, among other things, producing and
distributing subscription music, video, data and other services to commercial
subscribers, through its owned and independent Muzak Affiliates (as hereinafter
defined); and
D. EchoStar desires to permit Muzak and Participating Muzak Affiliates
(as hereinafter defined) to act as agents on behalf of EchoStar to solicit
orders for certain programming services to be delivered via the EchoStar System
(as hereinafter defined), all subject to the terms and conditions more fully set
forth herein, recognizing that as agents of EchoStar, EchoStar, in its sole
discretion, shall set the retail prices for such programming services, as set by
EchoStar from time to time; and
E. Muzak and Participating Muzak Affiliates desire to undertake certain
responsibilities with respect to the solicitation of orders for certain
programming services delivered via the EchoStar System, all subject to the terms
and conditions more fully set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 2
________________________________________________________________________________
SECTION 1. DEFINITIONS
In addition to the terms defined above or elsewhere in this Agreement, the
following capitalized terms shall have the meanings ascribed to them in this
Section 1 (It is the intent of the parties that the definitions used in this
Agreement be consistent with the definitions used in the Uplink Agreement and
the DBS Affiliation Agreement. To the extent of any conflict between a defined
term in this Agreement and a defined term in the Uplink Agreement or the DBS
Affiliation Agreement, it is the parties' intent that the two terms be
interpreted in the most reasonable manner so as to give the same or as
reasonably similar an interpretation to such defined term as is possible.):
1.1 "Affected Party" shall have the meaning given to such term in
Section 12.3 of this Agreement.
1.2 "Affiliate Consent" shall have the meaning given to such term in
Section 12.4 of this Agreement.
1.3 "Affiliated Entities" shall mean, with respect to any person or
entity, any other person or entity directly or indirectly controlling,
controlled by or under common control (i.e., the power to direct affairs by
reason of ownership of voting stock, by contract or otherwise) with, such person
or entity, any partner of such person or entity, and any member, director,
officer or employee of such person or entity.
1.4 "Commercial Music Subscribers" shall mean customers who enter
into agreements with Participating Muzak Affiliates providing for receipt via
the EchoStar System of the Muzak Service, at retail, business, office or other
commercial locations.
1.5 "Commercial Video Services" shall mean video programming services
for which Muzak and Participating Muzak Affiliates may solicit orders from
Commercial Video Subscribers, as set forth in attached Exhibit A, as such
Commercial Video Services may change from time to time in EchoStar's sole
discretion, subject to Section 4.1.
1.6 "Commercial Video Subscribers" shall mean customers who enter
into agreements with Participating Muzak Affiliates providing for receipt via
the EchoStar System of the Commercial Video Services, at retail, business,
office or other commercial locations.
1.7 "EchoStar Indemnities" shall mean EchoStar, its Affiliated
Entities, its EchoStar Agents, its contractors, subcontractors, authorized
distributors, agents and programming suppliers, and the partners, directors,
officers, employees and agents of EchoStar,
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 3
________________________________________________________________________________
its Affiliated Entities, its EchoStar Agents, its contractors, subcontractors,
distributors, agents and programming suppliers.
1.8 "EchoStar Dealer Agreement" shall mean the agreement, attached
hereto as Exhibit B, as amended from time to time, which a Muzak Affiliate must
execute in order to solicit orders for the Video Services.
1.9 "EchoStar Sales Agents" shall mean those persons or entities
authorized by EchoStar to act as agents of EchoStar to solicit orders for
certain audio, video and data programming services delivered via the EchoStar
System, excluding Muzak Affiliates.
1.10 "EchoStar System" shall mean the direct broadcast satellite
delivery system utilized by EchoStar and located at a 119 degrees orbital slot
assignment with 12.2 to 12.7 GHz downlink frequencies, and authorized by the
Federal Communication Commission ("FCC") for delivery of multi-channel digital
audio, video and data services.
1.11 "Equipment" shall have the meaning given to such term in Section
9 of this Agreement.
1.12 "Exclusive Muzak Territories" shall have the meaning given to
such term in Section 2.2 of this Agreement.
1.13 "Force Majeure" shall mean an event described in Section 13.8 of
this Agreement.
1.14 "Indemnified Party" shall mean a party seeking indemnification
pursuant to Section 11.3 of this Agreement.
1.15 "Indemnifying Party" shall mean a party from whom indemnification
is sought pursuant to Section 11.3 of this Agreement.
1.16 "Muzak" shall have the meaning given to such term in the
introductory paragraph of this Agreement, and shall be deemed to include owned
Muzak Affiliates, except where circumstances otherwise require or where it would
not be logical to infer such inclusion.
1.17 "Muzak Affiliates" shall mean those existing owned and
independent operators at the effective date of this Agreement, and their
successors, assignees and transferees as permitted by Muzak, that have the
exclusive right to use the existing Muzak(R) trademark and certain other
trademarks of Muzak, and to distribute subscription music services, adjunct
services related to the sequencing, changing and switching of music-program
communications,
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 4
________________________________________________________________________________
and certain adjunct services related to the delivery of advertising, data and
video communications.
1.18 "Muzak Affiliation Agreement" shall mean collectively the
franchise agreement and the Participating Affiliate Agreement between Muzak and
an independent Muzak Affiliate.
1.19 "Muzak Indemnities" shall mean Muzak, the Participating Muzak
Affiliates, its Affiliated Entities, its contractors, subcontractors and
authorized distributors and agents, and the partners, directors, officers,
employees and agents of Muzak, the Participating Muzak Affiliates, such
Affiliated Entities, contractors, subcontractors, distributors and agents.
1.20 "Muzak Services" shall mean the Music Channels and the Exclusive
Muzak Channels as defined in the Uplink Agreement.
1.21 "Other Party" shall have the meaning given to such term in
Section 12.2 of this Agreement.
1.22 "Participating Muzak Affiliate" shall mean a Muzak Affiliate that
executes an EchoStar Dealer Agreement with EchoStar in the form attached hereto
as Exhibit B.
1.23 "Participating Affiliate Agreement" shall mean the agreement
between Muzak and an independent Muzak Affiliate pursuant to which Muzak obtains
Affiliate Consent and which agreement shall require Participating Muzak
Affiliates to comply with all terms and conditions in this Agreement, the Uplink
Agreement and the DBS Affiliation Agreement, applicable to Muzak Affiliates.
1.24 "Residential Services" shall mean the Residential Video Services
and the Muzak Services for which Muzak and Participating Muzak Affiliates may
solicit orders from Residential Subscribers.
1.25 "Residential Subscribers" shall mean customers who subscribe to
any or all of the Residential Services at their homes.
1.26 "Residential Video Services" shall mean the video programming
services for which Muzak and Participating Muzak Affiliates may solicit orders
from Residential Subscribers, as set forth in attached Exhibit A, as such
Residential Video Services may change from time to time in EchoStar's sole
discretion.
1.27 "Second Satellite Launch" shall mean the initial date on which
EchoStar commences transmission of the Video Services on a second EchoStar
System satellite, which date shall in no event be later than December 31, 1997.
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 5
________________________________________________________________________________
1.28 "Service Launch" shall mean the initial date on which EchoStar
commences transmission of the Video Services to Subscribers for revenue-
generating purposes, which date shall in no event be later than October 31,
1996.
1.29 "Subscribers" shall mean Commercial Video Subscribers or
Residential Subscribers.
1.30 "Term" shall mean the duration of this Agreement, as set forth in
Section 12.1 hereof.
1.31 "Territory" shall mean the footprint of the EchoStar System,
subject to any international, foreign, Federal, state, local or municipal,
conventions, treaties, laws, statutes, regulations, rules, ordinances or codes,
or prohibitions contained in programming agreements, which otherwise limit or
restrict EchoStar's right or ability to deliver any audio, video or data
programming services via the EchoStar System for receipt in any given
jurisdiction.
1.32 "Third Party Claim" shall mean any claim, assessment, action,
suit, audit or proceeding by a third party in respect of which indemnity may be
sought pursuant to Section 11.3 of this Agreement.
1.33 "Video Services" shall mean direct broadcast satellite-delivered,
multi-channel, digital video programming services for which Muzak and
Participating Muzak Affiliates may solicit and take orders for EchoStar under
this Agreement, including the Commercial Video Services and the Residential
Services.
SECTION 2. APPOINTMENT OF AGENT
2.1 Appointment. Subject to the terms and conditions of this
-----------
Agreement, EchoStar designates Muzak and Participating Muzak Affiliates as non-
exclusive authorized agents to solicit and take orders for the Video Services
from Subscribers, provided that Muzak and such Participating Muzak Affiliates
execute an EchoStar Dealer Agreement.
2.2 Participation of Muzak Affiliates. Nothing in this Agreement
---------------------------------
(except the confidentiality provisions) shall be binding on any Muzak Affiliate
until such time as any such Muzak Affiliate executes the Participating Affiliate
Agreement and the EchoStar Dealer Agreement, and then only to the extent set
forth in such Participating Affiliate Agreement and the EchoStar Dealer
Agreement. The Muzak Affiliation Agreement shall provide or otherwise
incorporate by reference that Participating Muzak Affiliates shall be bound by
all of the terms and conditions of this Agreement with respect to the
solicitation of orders for Video Services. Muzak further represents and
warrants that it will immediately terminate the right of any Participating Muzak
Affiliate to solicit orders for the Video Services which fails at any time to
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 6
________________________________________________________________________________
comply with the terms and conditions of this Agreement, following written notice
and a reasonable period (not to exceed thirty (30) days) to cure such non-
compliance. Failure by Muzak to comply with the foregoing representations and
warranties shall be a material breach of this Agreement, permitting EchoStar to
terminate this Agreement in accordance with Section 12.2(d) below.
2.3 Exclusive Muzak Territories. EchoStar acknowledges that Muzak
---------------------------
has assigned Exclusive Muzak Territories to each Muzak Affiliate under the Muzak
Affiliation Agreement, with respect to distribution of the Muzak Services.
Subject to Affiliate Consent in accordance with Section 12.4 below, such grant
shall not diminish in any manner EchoStar's rights to distribute the Music
Channels (as defined in the DBS Affiliation Agreement) pursuant to the DBS
Affiliation Agreement. It is understood, however, that nothing in this Agreement
or the EchoStar Dealer Agreement shall confer any exclusive rights or exclusive
territories to Muzak or any Participating Muzak Affiliate with respect to
anything other than the Exclusive Muzak Channels (as defined in the Uplink
Agreement), and Muzak has not and shall not confer any such rights upon any
Participating Muzak Affiliate and shall not make any representations to any
Muzak Affiliate that it has, or has the right to grant to any Muzak Affiliates,
any such rights.
2.4 EchoStar and Other EchoStar Sales Agents. Muzak understands that
----------------------------------------
EchoStar intends to designate and appoint others as EchoStar Sales Agents
presently and in the future to act as authorized agents, and EchoStar may
solicit orders from Residential Subscribers for any Muzak Services other than
Muzak's Environmental(R) and FM-One(R) channels, itself and through its
Affiliated Entities, in the Territory and in other areas. Further, Muzak
understands and acknowledges that EchoStar and its Affiliated Entities may
directly or indirectly sell any Muzak Services other than Muzak's
Environmental(R) and FM-One(R) channels, including, without limitation, through
direct solicitation of potential customers by telemarketing and mass media,
direct sales efforts by EchoStar to subscribers and potential customers, and
arrangements with satellite or other retailers or sales agents. EchoStar may
also, in its sole discretion, enter into agreements with other entities to serve
retailers or other entities serving other markets (such as the consumer
electronics market) which other entities may be located in the Territory or in
other areas and may target the same customers as are targeted by Muzak or Muzak
Affiliates.
SECTION 3. UPLINK AGREEMENT AND DBS AFFILIATION AGREEMENT
3.1 Uplink Agreement. Contemporaneous with the execution of this
----------------
Agreement, the parties have executed the Uplink Agreement, pursuant to which
EchoStar shall uplink and deliver the Muzak Services.
3.2 DBS Affiliation Agreement. Contemporaneous with the execution of
--------------------------
this Agreement, the parties have executed the DBS Affiliation Agreement,
pursuant to which
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 7
________________________________________________________________________________
EchoStar may distribute the Music Channels, itself and through EchoStar Sales
Agents, via the EchoStar System.
SECTION 4. VIDEO SERVICES
4.1 Video Services. EchoStar, in its sole discretion, shall
--------------
determine the programming that will make up the Video Services, and the pricing
thereof. The initial Commercial Video Services and Residential Video Services
are listed in Exhibit A hereto. EchoStar may from time to time change the
content and pricing of the Video Services in its sole discretion. EchoStar will
provide Muzak with as much notice as is reasonable under the circumstances of
any changes to the Video Services prior to the effective date of such change,
and issue a revised Exhibit A to reflect such changes to the Commercial Video
Services and Residential Video Services. Subject to Section 4.2 and any other
restrictions and limitations in this Agreement, EchoStar will use commercially
reasonable efforts to clear as much video programming services for Commercial
Video Subscribers as is allowable by programming suppliers, and will offer Muzak
and Participating Muzak Affiliates the opportunity to solicit orders for such
commercial video programming services (except industry-specific programming,
programming that is proprietary to a particular subscriber and pay-per-view
movies), including free previews of particular services if permitted by the
programming supplier.
4.2 Restrictions on Video Services. Muzak understands and
------------------------------
acknowledges that EchoStar's ability to offer Muzak and Participating Muzak
Affiliates the opportunity to solicit orders for Commercial Video Services and
Residential Video Services is restricted by its agreements with programming
suppliers, which agreements may restrict EchoStar's rights to package and sell
such programming services and to permit others to solicit orders for such
programming services. Muzak further understands and acknowledges that such
restrictions will have a direct effect on the type, if any, of Commercial Video
Services and Residential Video Services for which EchoStar may permit Muzak and
Participating Muzak Affiliates the opportunity to solicit orders. Muzak
understands and acknowledges that certain video programming may be prohibited
from sale to commercial locations or for commercial purposes, or subject to
blackouts and other limitations on availability in certain geographic areas from
time to time as determined by the programming suppliers or by law, and that the
content of the Commercial Video Services and Residential Video Services may
change from time to time without notice in the sole and absolute discretion of
the programming suppliers. EchoStar shall have no liability whatsoever to Muzak
or to any Participating Muzak Affiliate for any programming restrictions,
limitations or changes imposed by programming suppliers or by law, all of which
Muzak acknowledges and agrees are outside of EchoStar's control.
4.3 Video Services Costs. EchoStar shall be responsible for all
--------------------
costs of programming, production, playback, transmission and, if any,
performance rights fees (including, but not limited to, the costs of copyright,
royalty and ASCAP, BMI, SESAC or other
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 8
________________________________________________________________________________
performance rights payments) with respect to the Commercial Video Services and
Residential Video Services and performance of such services at subscriber
locations ("Performance Rights Fees").
4.4 Ownership of Video Programming. All ownership, right, title and
------------------------------
interest of any nature in and to all or any part of the programming contained in
the Commercial Video Services and Residential Video Services is vested
exclusively in EchoStar and/or its programming suppliers and neither Muzak nor
any Participating Muzak Affiliate shall have any right, title or interest in or
to all or any part of the programming contained in the Commercial Video Services
and Residential Video Services, except as specifically permitted under this
Agreement.
SECTION 5. PRICING OF VIDEO SERVICES
5.1 Retail Pricing. EchoStar shall, in its sole discretion,
--------------
determine the retail price at which orders may be taken by Muzak and
Participating Muzak Affiliates for the Video Services. Muzak will only solicit
orders for the Video Services at the retail prices set by EchoStar from time to
time. The initial retail prices for the Commercial Video Services and the
Residential Video Services are set forth in Exhibit A. EchoStar, in its sole
discretion, may from time to time change the retail price for the Video
Services. EchoStar will provide Muzak with notice of any changes to the retail
prices for the Commercial Video Services and Residential Video Services prior to
the effective date of such change, and issue a revised Exhibit A to reflect such
changes. Price changes shall be effective upon notice from EchoStar, unless a
later date is stated in the notice from EchoStar.
SECTION 6. PAYMENT FOR VIDEO SERVICES
6.1 Payment of Commissions for Commercial Video Services.
----------------------------------------------------
(a) EchoStar will pay commissions to Muzak or Participating
Muzak Affiliates, as applicable, for "Paid Commercial Video Services" (together
with commissions payable pursuant to Section 6.2 below, "Commissions") in the
amount of [**]. "Paid Commercial Video Services" shall mean an order for
Commercial Video Services placed with Muzak or a Participating Muzak Affiliate,
as applicable, by a Commercial Video Subscriber, for which EchoStar has received
payment (i.e., based on actual receipts). EchoStar shall have the right, in its
reasonable discretion, to accept or reject, in whole or in part, all orders for
Commercial Video Services. EchoStar shall pay Commissions for Paid Commercial
Video Services to Muzak or Participating Muzak Affiliates, as applicable, within
forty-five (45) days of the end of each month.
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 9
________________________________________________________________________________
(b) The Commissions paid to Muzak and Participating Muzak
Affiliates for Paid Commercial Video Services shall be based on the retail
subscription price (exclusive of any sales, use or excise taxes), and shall be
payable for so long as such Commercial Video Subscribers receive the Commercial
Video Services. All expenses incurred by Muzak and Participating Muzak
Affiliates shall be deemed covered by the Commissions paid to Muzak and
Participating Muzak Affiliates as provided above.
6.2 Payment of Commissions for Residential Services.
-----------------------------------------------
(a) EchoStar will pay Commissions to Muzak or Participating
Muzak Affiliates, as applicable, in accordance with the EchoStar Dealer
Agreement, for "Paid Residential Services" in the amount of [**].
"Paid Residential Services" shall mean an order for Residential Services placed
with Muzak or a Participating Muzak Affiliate, as applicable, by a Residential
Subscriber, for which EchoStar has received payment (i.e., based on actual
receipts). EchoStar shall have the right, in its reasonable discretion, to
accept or reject, in whole or in part, all orders for Residential Services.
EchoStar shall pay Commissions for Paid Residential Services to Muzak or
Participating Muzak Affiliates, as applicable, within forty-five (45) days of
the end of each month.
(b) The Commissions paid to Muzak and Participating Muzak
Affiliates for Paid Residential Services shall be based on the retail
subscription price (exclusive of any sales, use or excise taxes) for each such
Paid Residential Services order. All expenses incurred by Muzak and
Participating Muzak Affiliates shall be deemed covered by the Commissions paid
to Muzak as provided above.
6.3 Other Commission Payment Terms.
------------------------------
(a) Muzak acknowledges and agrees that, in addition to any other
rights and remedies available, EchoStar shall not pay any Commissions for orders
taken for Paid Residential Services or Paid Commercial Video Services in the
event Muzak is in breach or default of this Agreement (and provided EchoStar has
provided notice of such breach or default to Muzak in accordance with Section
13.1), and EchoStar shall have no liability to Muzak as a result thereof.
(b) No payments to Muzak under this Agreement, or to
Participating Muzak Affiliates under the EchoStar Dealer Agreement, whether in
whole or in part, shall operate or be deemed as EchoStar's acceptance of or
admission that Muzak has complied with any provisions of this Agreement, or that
Participating Muzak Affiliates have complied with the terms of the EchoStar
Dealer Agreement.
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 10
________________________________________________________________________________
(c) In the case of multi-month subscriptions, Commissions will
be paid monthly as the Video Services are provided, even if a multi-month
payment is received by EchoStar.
(d) [intentionally deleted].
6.4 Direct Payment to Muzak or a Participating Muzak Affiliate.
----------------------------------------------------------
Muzak and Participating Muzak Affiliates are prohibited from collecting payment
directly from a Residential Subscriber or a Commercial Video Subscriber.
6.5 Interruption of Video Services. EchoStar shall set, and Muzak
------------------------------
and the Participating Muzak Affiliates shall follow, EchoStar's policies
regarding credits to Subscribers for interruption of Video Services, which
policies shall be set by EchoStar from time to time in EchoStar's sole
discretion, and communicated to Muzak by EchoStar.
6.6 Late Payments. In the event that any overdue balances are ever
-------------
owed by one party to the other, late charges shall be assessed on a monthly
basis at the rate of 1.5% of the outstanding balance per month or the maximum
amount allowed by law, whichever is lower. Notwithstanding the above, a party
shall have one (1) late payment of no more than ten (10) days following the date
upon which such amount was due in any calendar year without incurring late
payment charges with respect to such payment due.
6.7 Subscriber Cancellations. Muzak understands that any Video
------------------------
Services which are cancelled by a Subscriber, or for which a credit is issued,
shall effect a pro rata reduction in Commissions paid or payable to Muzak or
Participating Muzak Affiliates, as applicable, for Residential Services and
Commercial Video Services, to be assessed as a charge back to Muzak or
Participating Muzak Affiliates, as applicable, which charge back may be offset
against any money due to Muzak or Participating Muzak Affiliates, as applicable,
from EchoStar or otherwise to be reimbursed by Muzak or Participating Muzak
Affiliates, as applicable, to EchoStar.
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 11
________________________________________________________________________________
SECTION 7. REPORTS, BOOKS AND RECORDS; RIGHT TO AUDIT
7.1 Reports.
-------
Within forty-five (45) days after the end of each month, EchoStar shall
supply to Muzak and each Participating Muzak Affiliate with respect to all
orders for the Video Services appropriate information to verify the payments
owed to Muzak and Participating Muzak Affiliates under this Agreement,
including, without limitation, the Video Services ordered and the retail price
of such Video Services.
7.2 Muzak's Audit Rights.
--------------------
(a) EchoStar shall keep complete and accurate books and records
related to payment of Commissions for Paid Residential Services and Paid
Commercial Video Services. During the term of this Agreement and for a period
of one (1) year thereafter, Muzak or its designated representative may, in its
reasonable discretion, on at least ten (10) days' advance written notice, not
more than once in any twelve (12) month period, at EchoStar's offices, at
reasonable times within regular business hours approved by EchoStar, which
approval shall not be unreasonably withheld, and at Muzak's sole cost and
expense, inspect and audit such books and records, provided that such inspection
and audit shall be no more extensive than is required to verify that EchoStar's
payments of Commissions to Muzak and Participating Muzak Affiliates have been
properly computed in accordance with the terms of this Agreement or the EchoStar
Dealer Agreement, as applicable. Muzak shall not assess EchoStar for amounts
found, as a result of such audit, to be owing thereafter if such amounts relate
to a reporting period that ended more than two (2) years prior to the date such
audit commenced. In the event that any audit undertaken by Muzak results in a
determination that there has been either an underpayment or overpayment of the
amounts due Muzak or Participating Muzak Affiliates hereunder, then within
thirty (30) days after such determination, Muzak or EchoStar, as the case may
be, shall pay to the other the amount of such underpayment or overpayment plus
simple interest accrued on a daily basis from the date payment was due to the
date of payment, at the prime rate of the Union Bank of Switzerland, New York
Branch, in effect at the time of payment. Muzak shall bear all costs related to
an audit of EchoStar's books and records, except if such audit reveals an
underpayment in excess of five percent (5%) for all payments in the aggregate in
the applicable period audited, in which case EchoStar shall pay Muzak's
reasonable expenses related to the audit.
(b) During any audit hereunder, Muzak or its designated
representative (at Muzak's cost and expense) may make copies of only those books
and records relating to Commissions to Muzak and Participating Muzak Affiliates
for Paid Residential Services and Paid Commercial Video Services that are
necessary for the verification of statements and accountings to Muzak and
Participating Muzak Affiliates and that were physically examined as part of the
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VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 12
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audit. Muzak shall provide EchoStar with a copy of the audit report so EchoStar
can verify the results of the audit. Muzak acknowledges and agrees that all
information disclosed or made available by EchoStar during the course of an
audit by Muzak is proprietary to EchoStar. Muzak shall take reasonable
precautions to safeguard the confidentiality of all such information, including,
without limitation, any copies thereof (and in any event Muzak shall exercise
the same precautions it uses to safeguard its own confidential and proprietary
information) and shall destroy any such copies upon the mutually-confirmed
completion of the audit and payment in full of any fees and other charges
determined to be owing to Muzak or a Participating Muzak Affiliate as a result
of such audit. Muzak shall not, during the Term or at any time thereafter, use
any information disclosed or made available by EchoStar in the course of an
audit by Muzak for any purpose whatsoever except to verify that EchoStar's
payments to Muzak and the Participating Muzak Affiliates have been properly
computed in accordance with the terms of this Agreement.
(c) In the event that a party disputes the results of an audit,
the parties shall attempt to resolve the matter by conducting a new audit under
the joint supervision of their respective independent certified public
accountants. In the event that such new audit resolves the dispute, the cost of
each party's independent certified public accountants shall be borne by such
party. In the event that such new audit fails to resolve the dispute, the matter
shall be resolved by binding arbitration in Denver, Colorado under the then
applicable rules of the American Arbitration Association and the prevailing
party shall be reimbursed by the other party for all of its costs of the second
audit and for its reasonable attorneys fees.
SECTION 8. ECHOSTAR'S AND ECHOSTAR'S PROGRAMMING SUPPLIERS'
TRADEMARKS
8.1 (a) EchoStar's Trademarks. Muzak and Participating Muzak
---------------------
Affiliates shall not use any of EchoStar's trademarks, trade names or service
marks ("EchoStar Trademarks") without the prior written consent of EchoStar,
which consent shall not be unreasonably withheld. EchoStar reserves the right
to require Muzak and Participating Muzak Affiliates to use certain EchoStar
Trademarks in connection with the solicitation of orders for the Video Services.
EchoStar further reserves the right to require Muzak and Participating Muzak
Affiliates, as a condition to being permitted to use EchoStar Trademarks, to
execute EchoStar's Trademark License Agreement in such Form as EchoStar deems
acceptable. In the event EchoStar permits Muzak to use any EchoStar Trademarks,
Muzak and Participating Muzak Affiliates shall fully comply with and strictly
follow any and all instructions and guidelines related to the usage of
EchoStar's Trademarks as determined by EchoStar from time to time in its sole
discretion. All rights to EchoStar's Trademarks shall remain vested in EchoStar
during the term and following any termination of this Agreement, and Muzak
acknowledges that neither it nor any Participating Muzak Affiliates shall have
any rights therein.
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VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 13
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(b) EchoStar's Programming Suppliers' Trademarks. Muzak and
--------------------------------------------
Participating Muzak Affiliates shall not use any of EchoStar's programming
suppliers' trademarks, trade names or service marks ("Programming Suppliers'
Trademarks"), without the prior written consent of EchoStar. Muzak recognizes
that EchoStar's programming suppliers may not grant authorization to EchoStar
for Muzak and Participating Muzak Affiliates to use Programming Suppliers'
Trademarks, and EchoStar makes no representations to Muzak that EchoStar's
programming suppliers will at any time during the Term authorize EchoStar to
permit Muzak and Participating Muzak Affiliates to use any Programming
Suppliers' Trademarks. Muzak recognizes that EchoStar and/or EchoStar's
programming suppliers may require Muzak and Participating Muzak Affiliates, as a
condition to being permitted to use Programming Suppliers' Trademarks, to
execute a Trademark License Agreement in such form as EchoStar and/or Echostar's
programming suppliers deem acceptable. In the event EchoStar permits Muzak to
use any Programming Suppliers' Trademarks, Muzak shall, and shall cause
Participating Muzak Affiliates to, fully comply with and strictly follow any and
all instructions or guidelines related to the usage of Programming Suppliers'
Trademarks as determined by EchoStar and/or Programming Suppliers' Trademarks
from time to time in their sole discretion. Muzak acknowledges and agrees that
all rights to Programming Suppliers' Trademarks shall remain vested in such
programming suppliers and their affiliates during the Term and following any
termination of this Agreement, and Muzak acknowledges that neither it nor any
Participating Muzak Affiliate shall have any rights therein.
SECTION 9. EQUIPMENT
9.1 Equipment Available for Purchase. During the first three years
--------------------------------
following Service Launch, Muzak and the Participating Muzak Affiliates shall
purchase the equipment identified on Schedule 9.1(a) hereto, which equipment
shall meet the specifications identified on Schedule 9.1(b) hereto (the
"Equipment") exclusively from EchoStar. At all times thereafter during the term
of this Agreement, Muzak and the Participating Muzak Affiliates may, but shall
not be obligated to, purchase Equipment from EchoStar.
9.2 Equipment Prices. The terms and wholesale prices at which Muzak
----------------
and the Participating Muzak Affiliates shall be entitled to purchase such
Equipment shall be no less favorable than the terms and wholesale prices then
available to distributors which perform the same marketing, economic and
promotional functions and which purchases like quantities of Equipment from
EchoStar.
9.3 Fulfillment Distribution Services. If requested by Muzak,
---------------------------------
EchoStar shall provide fulfillment distribution services with respect to the
Equipment, including warehousing and distribution of the Equipment, on an as
needed basis, on such terms as are mutually agreed to by the parties.
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 14
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SECTION 10. REPRESENTATIONS, WARRANTIES AND COVENANTS
10.1 Mutual Representations, Warranties and Covenants.
------------------------------------------------
Each of the parties represents, warrants and covenants to the
other that: (i) it has full power and authority to enter into and fully perform
its obligations under this Agreement (with respect to Muzak, however, subject to
Affiliate Consent required pursuant to Section 12.4 below); (ii) it has not and
will not during the Term enter into any agreement or arrangement which limits
the full performance of its obligations hereunder; (iii) it is and will remain
in full compliance with all applicable local, state and federal laws and
regulations, including but not limited to such statutes, laws, rules,
regulations and orders enforced, administered, promulgated or pronounced by the
Federal Communications Commission; (iv) the execution of this Agreement by it
will not: (a) result in any breach of, or constitute a default under, any
contract, agreement, corporate charter, bylaw, or other instrument or agreement
to which it is a party or by which it or its property may be bound or affected,
or (b) require the consent of any third party (with respect to Muzak, however,
subject to Affiliate Consent required pursuant to Section 12.4 below); (v) it
has obtained, and shall maintain in full force during the Term, such federal,
state and local authorizations as are necessary to operate the business it is
conducting in connection with its rights and obligations under this Agreement;
(vi) it is under no obligation and will not become subject to any obligation
that might interfere with its performance of this Agreement (with respect to
Muzak, however, subject to Affiliate Consent required pursuant to Section 12.4
below); and (vii) it will comply with all of its representations, warranties,
obligations, covenants and responsibilities herein contained. All
representations, warranties and covenants made hereunder shall survive execution
of this Agreement.
10.2 Additional Muzak Representations, Warranties and Covenants.
----------------------------------------------------------
(a) Muzak and Participating Muzak Affiliates shall not make any
warranty or representation with respect to or relating to the Commercial Video
Services or Residential Video Services inconsistent with or in addition to any
warranty or representation stated in writing by EchoStar. If Muzak or any
Participating Muzak Affiliate makes any such inconsistent or additional warranty
or representation, Muzak and Participating Muzak Affiliates shall, as
applicable, at its own, and their own expense, indemnify, defend and hold
EchoStar and its Affiliated Entities harmless from any claims relating thereto.
Muzak understands that EchoStar may terminate Muzak's or any Participating Muzak
Affiliate's privilege to solicit orders for the Commercial Video Services or
Residential Video Services for failure to comply with this provision or any
other representation contained in this Section 10.
(b) Muzak and Participating Muzak Affiliates shall maintain the
highest ethical business standards and shall never take or fail to take any
action which might negatively influence the EchoStar name, trademarks, service
marks, trade names or other good names of
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VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 15
________________________________________________________________________________
EchoStar or its Affiliated Entities or the name, trademarks, service marks,
trade names or other good names of any programming suppliers or their
affiliates.
(c) Muzak, at its sole expense, and Participating Muzak
Affiliates, at their sole expense, shall obtain all permits and licenses which
may be required under any applicable Federal, State or local law, ordinance,
rule or regulation by virtue of any acts performed by Muzak and Participating
Muzak Affiliates in the performance of this Agreement, and promptly upon request
provide such permits or licenses to EchoStar for inspection. Muzak and
Participating Muzak Affiliates shall in the conduct of said business and in the
performance of this Agreement comply fully with all applicable Federal, State
and local laws, ordinances, rules and regulations, including, without limiting
the foregoing, all rules and regulations of the Federal Communications
Commission or the Federal Trade Commission.
(d) Muzak and Participating Muzak Affiliates shall comply with
all laws relating to signal piracy, which includes, but is not limited to,
unauthorized receipt, interception, publication, and/or distribution of and/or
interference with, privately-owned transmission of information.
(e) EchoStar and Muzak, at shared expense, shall conduct an
initial training course for all Participating Muzak Affiliates concerning the
Video Services prior to any Participating Muzak Affiliate commencing any order
solicitation efforts for Video Services. Thereafter, Muzak, at EchoStar's
expense, shall assist in such other training courses as, where and when
reasonably required from time to time by EchoStar during the Term.
(f) At all times during the term of this Agreement, Muzak and
Participating Muzak Affiliates shall comply with EchoStar's Policies and
Procedures Guidelines, which will incorporate, among other things, criteria for
Muzak and Participating Muzak Affiliates to maintain authorized EchoStar agent
status, Subscriber sign-up procedures, as well as other items related to the
solicitation of orders for Video Services, which EchoStar may amend from time to
time upon notice to Muzak and the Participating Muzak Affiliates. Muzak
understands and agrees that material non-compliance with any material aspect of
EchoStar's Policies and Procedures Guidelines or noncompliance with Section
8.1(a) or (b) hereof, shall constitute a material breach of this Agreement,
permitting EchoStar to terminate Muzak's or any Participating Muzak Affiliate's,
as applicable, status as an authorized EchoStar agent to solicit orders for
Video Services.
(g) EchoStar warrants and covenants that it shall secure and
maintain any and all necessary performing rights licenses required and that all
applicable payments for Performance Right Fees will be paid by EchoStar with
respect to the Commercial Video Services and Residential Video Services.
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 16
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SECTION 11. INDEMNIFICATION
11.1 Indemnification by EchoStar. EchoStar shall indemnify and hold
---------------------------
harmless the Muzak Indemnities from, against and with respect to any and all
claims, damages, liabilities, costs and expenses (including reasonable
attorneys' and expert's fees) (collectively "Damages") incurred in connection
with any claim against any of the Muzak Indemnities arising out of: (i)
EchoStar's breach of any provision of this Agreement; (ii) material (including
advertising or promotional copy) or programming included in the Video Services
supplied by EchoStar pursuant to this Agreement to the extent that the Muzak
Indemnities have not modified, altered or edited such material or programming,
or interrupted the distribution of such material or programming without
EchoStar's prior written consent; (iii) the distribution or cablecast of any
programming in the Video Services which violate or requires payment for use or
performance of any copyright, right of privacy, or literary, music performance
or dramatic right; and/or (iv) EchoStar's advertising and marketing of the Video
Services. In addition, EchoStar shall pay and hold the Muzak Indemnities
harmless from any federal, state or local taxes or fees that are based upon
revenues derived by, or the operations of, EchoStar.
THE MUZAK INDEMNITIES UNDERSTAND AND AGREE THAT ECHOSTAR'S OBLIGATION, AT LAW OR
OTHERWISE, TO INDEMNIFY THE MUZAK INDEMNITIES WITH RESPECT TO THE CONTENT OF ANY
PROGRAMMING SERVICES (INCLUDING, WITHOUT LIMITATION, CLAIMS RELATING TO
TRADEMARK, COPYRIGHT, MUSIC, MUSIC PERFORMANCE AND OTHER PROPRIETARY INTERESTS)
OR OTHERWISE, IS EXPRESSLY LIMITED TO THE AMOUNT OF ANY APPLICABLE PASS-THROUGH
INDEMNIFICATION PROVIDED TO ECHOSTAR PURSUANT TO ITS THEN-EXISTING AGREEMENTS
WITH THE PROVIDERS OF SUCH PROGRAMMING SERVICES OR EQUIPMENT.
11.2 Indemnification by Muzak. Muzak shall indemnify and hold harmless
------------------------
the EchoStar Indemnities from, against and with respect to any and all Damages
incurred in connection with any claim against any of the EchoStar Indemnities
arising out of: (i) Muzak's breach of any provision of this Agreement; (ii)
Muzak Services supplied by Muzak to Subscribers as part of the Video Services to
the extent that EchoStar has not modified, altered or edited such Muzak
Services, or interrupted the distribution of such Muzak Services without Muzak's
prior written consent; (iii) Muzak's sale, promotion, distribution, advertising
and marketing of the Video Services (except for advertising, promotional and
marketing materials supplied by or approved in writing by EchoStar) or any acts
or omissions on the part of Muzak inconsistent with the terms and conditions of
this Agreement; or (iv) a breach by any owned and operated Muzak Affiliate of
any provision of the EchoStar Sales Agent Agreement or any acts or omissions on
the part of any owned and operated Muzak Affiliate inconsistent with the terms
and conditions of this Agreement. In addition, Muzak shall pay and hold the
EchoStar
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VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 17
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Indemnities harmless from any federal, state or local taxes or fees that are
based upon revenues derived by, or the operation of, Muzak.
11.3 Indemnification Procedures. Should either party wish to assert a
--------------------------
claim for indemnification (a "Third Party Claim"), such party (the "Indemnified
Party") shall do so by promptly notifying the other party (the "Indemnifying
Party") in writing of such claim. The Indemnifying Party shall undertake the
defense of any Third Party Claim and permit the Indemnified Party to participate
therein at the Indemnified Party's expense. The settlement of any Third Party
Claim by an Indemnified Party, without the Indemnifying Party's prior written
consent, shall release the Indemnified Party from its obligations hereunder with
respect to such Third Party Claim so settled.
SECTION 12. TERM AND TERMINATION
12.1 Term. This Agreement shall commence on the date of execution by
----
both EchoStar and Muzak and shall continue until the expiration of the useful
life of the EchoStar System satellite on which EchoStar has allocated 2.4
megahertz of transponder capacity to Muzak for carriage of the Exclusive Muzak
Channels, unless this Agreement is terminated as provided in this Section 12.
12.2 Termination Upon Default. This Agreement may be terminated by a
------------------------
party (the "Affected Party"), in accordance with the procedures set forth in
Section 12.3 below, upon the occurrence of any of the following with respect to
the other party (the "Other Party"):
(a) The Other Party loses any Federal Communications Commission
broadcast, performance or similar license rights necessary to deliver the
services to be provided to the Affected Party under the terms of this Agreement,
and such default is not cured within sixty (60) days of receipt of written
notice from the Affected Party (or if such default cannot reasonably be cured by
the Other Party within such sixty (60) days, if such cure has been initiated by
the Other Party and the Other Party is diligently continuing to cure within that
time, the Other Party's opportunity to cure such default shall be extended for a
period of time not to exceed an additional thirty (30) days).
(b) The Other Party commits a payment default which is not: (i)
cured within sixty (60) days of receipt of written notice from the Affected
Party; or (ii) reserved against in accordance with the escrow procedures
outlined in Section 12.3 below.
(c) The Other Party (which, for purposes of this Section 12.2(c)
shall mean EchoStar alone) (i) is unable to launch the Video Services on the
first EchoStar System Satellite by October 31, 1996 or (ii) is unable to launch
a second EchoStar System satellite by December 31, 1997 (unless EchoStar then
allocates, or has allocated, 2.4 megahertz of transponder capacity
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 18
________________________________________________________________________________
to Muzak for carriage of the Exclusive Muzak Channels on the first EchoStar
System satellite), in each case, including without limitation due to the failure
to accomplish Service Launch or due to satellite failures, and such default is
not cured within sixty (60) days of receipt of written notice from the Affected
Party (or if such default cannot reasonably be cured by the Other Party within
such sixty (60) days, if such cure has been initiated by the Other Party and the
Other Party is diligently continuing to cure within that time, the Other Party's
opportunity to cure such default shall be extended for a period of time not to
exceed an additional thirty (30) days).
(d) The Other Party defaults on a material obligation or
breaches a material representation or warranty in this Agreement or in the
Uplink Agreement, the DBS Affiliation Agreement or the Trademark License
Agreement referred to in Section 8.1(a) above, and such default or breach is not
cured within sixty (60) days of receipt of written notice from the Affected
Party (or if such default or breach cannot be reasonably cured by the Other
Party within sixty (60) days, if such cure has been initiated by the Other Party
and the Other Party is diligently continuing to cure within that time, the Other
Party's opportunity to cure such default or breach shall be extended for a
period of time not to exceed an additional thirty (30) days). A default or
breach under this Agreement shall also give rise to a default under the Uplink
Agreement and the DBS Affiliation Agreement.
(e) If the Other Party files bankruptcy, has an involuntary
petition in bankruptcy filed against it (which petition is not dismissed within
forty five (45) days after filing), is insolvent, makes an assignment for the
benefit of creditors or has a trustee appointed to manage the affairs of the
Other Party.
12.3 Termination Procedure. The Affected Party may exercise its
---------------------
termination rights pursuant to Section 12.2 only by giving the Other Party a
notice of termination delivered in conformance with Section 13.1 of this
Agreement. Such notice shall specify the basis of termination, and shall
specify the applicable cure period. In the event of a payment default, the
Other Party may, within the sixty (60) days cure period referred to in Section
12.2(c) above, escrow the disputed amount with an escrow agent acceptable to the
Affected Party, and notify the Affected Party (in conformance with Section 13.1
of this Agreement) that it has done so. If such disputed amount is deposited in
escrow in accordance with the prior sentence, the parties shall seek to promptly
resolve such dispute in the manner set forth in Section 13.9 and the escrow
agent shall be instructed to disburse the disputed amount only upon receipt of
written instructions signed by both Muzak and EchoStar. Deposit of the disputed
amount in escrow will stay termination of this Agreement until the dispute is
resolved by the parties in the manner set forth in Section 11.9 or the parties
determine that the dispute cannot be resolved in accordance with Section 11.9.
Any dispute regarding whether a termination is effective shall be resolved in
the manner set forth in Section 13.9.
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VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 19
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12.4 Consent of Muzak Affiliates. The parties hereby acknowledge that
---------------------------
Muzak Affiliates have certain exclusive rights to distribute certain Muzak
Services in their respective Exclusive Muzak Territories, and that the provision
of the Music Service under the terms of the DBS Affiliation Agreement and the
grant of certain rights to EchoStar to distribute certain of the Muzak Services
may conflict with those exclusive rights. Accordingly, the performance of this
Agreement by Muzak is hereby conditioned upon the prior written consent of all
Muzak Affiliates ("Affiliate Consent"), which consent will be solicited by Muzak
promptly upon execution of this Agreement. If Muzak fails to obtain Affiliate
Consent within thirty (30) days after the execution of this Agreement, Muzak may
terminate this Agreement within ten (10) days thereafter by providing written
notice to EchoStar, and the DBS Affiliation Agreement and the Uplink Agreement
shall also automatically terminate as of the effective date of termination of
this Agreement. If Muzak elects not to terminate this Agreement,
notwithstanding that Muzak fails to obtain Affiliate Consent, Muzak hereby
agrees to indemnify and hold harmless the EchoStar Indemnities from, against and
with respect to any and all Damages incurred in connection with any claim by any
Muzak Affiliate against any of the EchoStar Indemnities arising out of Muzak's
failure to obtain Affiliate Consent.
12.5 Post-Termination Service.
------------------------
(a) Upon termination of this Agreement pursuant to Section 12.2
or 12.6, all subscription agreements to the Muzak Services sold by Muzak or
Participating Muzak Affiliates to Commercial Music Subscribers shall remain the
exclusive property of Muzak or such Participating Muzak Affiliates, as the case
may be. Muzak acknowledges and agrees that, upon termination, EchoStar shall
have the sole and exclusive ownership, right, title and interest of any nature
in and to all subscription agreements for video programming services purchased
by Subscribers, and Muzak and the Participating Muzak Affiliates shall continue
to receive Commissions on Commercial Video Services sold by them, in accordance
with Section 6.1 above.
(b) Muzak acknowledges and agrees that:
(i) all Residential Subscriber information (regardless of
whether the Subscriber has purchased Muzak Services); and
(ii) all Commercial Subscriber information to the extent
neither Muzak nor any Participating Muzak Affiliate has sold Muzak Services to
such Commercial Music Subscriber,
including but not limited to names, addresses and profiles, are proprietary to,
and the exclusive property of, EchoStar. During the term of this Agreement
Muzak and the Participating Muzak Affiliates shall use that information only to
the extent required for their performance of this
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VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 20
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Agreement, or as specifically permitted pursuant to this Agreement. Following
expiration of the Agreement neither Muzak nor any Participating Muzak Affiliate
shall use any such information for any reason, except to the extent specifically
permitted above, and for example but not by limitation, at no time either during
the term of this Agreement or following expiration thereof, shall Muzak or any
Participating Muzak Affiliate sell or otherwise provide that information to any
third parties, or use that information to solicit subscribers to subscribe to
any other programming service.
(c) EchoStar acknowledges and agrees that with respect to
Commercial Subscribers which:
(i) are not, and do not become, Commercial Video
Subscribers at any time; and
(ii) either Muzak or a Participating Muzak Affiliate is
entitled to a Commission in connection with the Commercial Subscriber,
all Commercial Subscriber information, including but not limited to names,
addresses and profiles, are proprietary to, and the exclusive property of, Muzak
or the applicable Participating Muzak Affiliate. During the term of this
Agreement EchoStar and EchoStar Sales Agents shall use that information only to
the extent required for their performance of this Agreement, or as specifically
permitted pursuant to this Agreement. Following expiration of this Agreement
EchoStar and EchoStar Sales Agents shall not use any such information for any
reason, except to the extent specifically permitted above, and for example but
not by limitation, at no time during the term of this Agreement shall EchoStar
or EchoStar Sales Agents sell or otherwise provide that information to any third
parties, and at no time either during the term of this Agreement or following
termination shall EchoStar or EchoStar Sales Agents use that information to
solicit subscribers to subscribe to any other programming service.
EchoStar, Muzak and the Muzak Affiliates agree that with respect
to any Commercial Subscriber not falling into one of the above categories, upon,
and at any time after, expiration of this Agreement, either party may solicit
the Commercial Subscriber to purchase any services, subject to a party's rights
in existing contracts.
The solicitation or sale of any services to any subscriber by
Muzak or a Participating Muzak Affiliate, on the one hand, or EchoStar or an
EchoStar Sales Agent, on the other hand, shall not be deemed to violate this
Section if proprietary subscriber information of the other party (as described
in this Section) is not used in connection with such solicitation of sale.
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VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 21
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(g) The parties acknowledge that, in the event of any actual or
threatened breach of paragraph (b) or (c) above, EchoStar, in the case of
paragraph (b) and Muzak and Participating Muzak Affiliates, in the case of
paragraph (c), will suffer irreparable and ongoing harm which, while
substantial, will not be fully compensable by damages. As a consequence, in the
event of any actual or threatened breach of such provisions, the non-breaching
party may, in addition and supplementary to any and all other rights and
remedies existing in its favor, obtain immediate and ongoing injunctive relief,
enjoining or restraining whatever violation may have occurred or be occurring or
may have been threatened. This injunctive relief shall be in the form of a
temporary restraining order, preliminary injunction or similar relief, and a
permanent injunction, as may be sought by the non-breaching party.
12.6 Limitation of Liability.
-----------------------
(a) Upon expiration or in the event this Agreement terminates or
is terminated for any reason set forth herein, if EchoStar is not in breach of
this Agreement, then EchoStar and its Affiliated Entities shall have no
liability or obligation to Muzak whatsoever, and for example, but not by way of
limitation, Muzak shall have no right to require EchoStar to continue to allow
Muzak and Participating Muzak Affiliates to solicit orders for Video Services.
Muzak agrees that upon expiration or in the event of termination of this
Agreement for any reason, if EchoStar is not in breach of this Agreement, no
amounts spent in its fulfillment will be recoverable by Muzak from EchoStar or
any of its Affiliated Entities.
(b) Upon expiration or in the event this Agreement terminates or
is terminated for any reason set forth herein, if Muzak is not in breach of this
Agreement, then Muzak and its Affiliated Entities shall have no liability or
obligation to EchoStar whatsoever, and for example, but not by way of
limitation, EchoStar shall have no right to require Muzak and Participating
Muzak Affiliates to continue to solicit orders for Video Services. EchoStar
agrees that upon expiration or in the event of termination of this Agreement for
any reason, if Muzak is not in breach of this Agreement, no amounts spent in its
fulfillment will be recoverable by EchoStar from Muzak or any of its Affiliated
Entities.
(c) IN NO EVENT SHALL ECHOSTAR OR ANY AFFILIATED ENTITY OF
ECHOSTAR BE LIABLE FOR ANY EXEMPLARY, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES (INCLUDING WITHOUT LIMITATION, ANY PAYMENT FOR LOST BUSINESS, FUTURE
PROFITS, LOSS OF GOODWILL, REIMBURSEMENT FOR EXPENDITURES OR INVESTMENTS MADE OR
COMMITMENTS ENTERED INTO, CREATION OF CLIENTELE, ADVERTISING COSTS, TERMINATION
OF EMPLOYEES OR EMPLOYEES' SALARIES, OR OVERHEAD OR FACILITIES INCURRED OR
ACQUIRED BASED UPON THE BUSINESS DERIVED OR ANTICIPATED UNDER THIS AGREEMENT) TO
MUZAK OR ANY PARTICIPATING MUZAK AFFILIATE, WHETHER FORESEEABLE OR NOT, FOR ANY
CAUSE
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 22
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WHATSOEVER WHETHER OR NOT CAUSED BY ECHOSTAR'S OR MUZAK'S OR PARTICIPATING MUZAK
AFFILIATE'S NEGLIGENCE. IN NO EVENT SHALL ANY PROJECTIONS OR FORECASTS BY
ECHOSTAR BE BINDING AS COMMITMENTS OR PROMISES BY ECHOSTAR.
(d) IN NO EVENT SHALL MUZAK BE LIABLE FOR ANY EXEMPLARY,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES TO ECHOSTAR, WHETHER FORESEEABLE OR
NOT, FOR ANY CAUSE WHATSOEVER WHETHER OR NOT CAUSED BY MUZAK'S OR ECHOSTAR'S
NEGLIGENCE. IN NO EVENT SHALL ANY PROJECTIONS OR FORECASTS BY MUZAK BE BINDING
AS COMMITMENTS OR PROMISES BY MUZAK.
12.7 Muzak's Obligations on Termination. Upon termination of this
----------------------------------
Agreement, Muzak and Participating Muzak Affiliates shall promptly, at its, and
their, own expense: (a) discontinue all use of EchoStar Trademarks and
Programming Suppliers' Trademarks (if applicable) and confusingly similar or
conflicting trademarks, service marks, trade names and all other indicia or
origin; (b) take all action reasonably requested by EchoStar to assist in the
termination of this Agreement; (c) deliver to EchoStar, or destroy, at
EchoStar's option and cost (but not including cost of merchandise delivered or
destroyed), all tangible things of every kind in the possession or control of
Muzak and Participating Muzak Affiliates that bear any of EchoStar Trademarks or
any Programming Suppliers' Trademarks (upon request by EchoStar, Muzak and
Participating Muzak Affiliates shall certify in writing to EchoStar that such
concealment, delivery or destruction has taken place); and (d) return the
EchoStar Policies and Procedures Guidelines and any other materials or
literature which include EchoStar Trademarks or any Programming Suppliers'
Trademarks.
12.8 Survival of Terms. The rights and obligations pursuant to
-----------------
Sections 6, 7, 8, 10, 11, 12.5, 12.6, 12.7, 12.8, 13.4, 13.7 and 13.11 shall
survive expiration or termination of this Agreement. Any obligations of the
parties arising prior to termination shall survive termination of this Agreement
and continue in full force and effect until the same have been completely
discharged.
SECTION 13. MISCELLANEOUS
13.1 Notices. Except as set forth below, all notices hereunder shall
be in writing and delivered by hand or sent by certified mail, return receipt
requested, overnight delivery service or by facsimile to the receiving party at
its address or facsimile number set forth below or as otherwise designated by
written notice. Notice to EchoStar shall be provided as follows:
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 23
________________________________________________________________________________
EchoStar Satellite Corporation
90 Inverness Circle East
Englewood, Colorado 80112
Attention: Carl E. Vogel, Executive Vice President
and Chief Operating Officer
Fax: (303) 799-0354
with copy to: EchoStar Satellite Corporation
90 Inverness Circle East
Englewood, Colorado 80112
Attention: David K. Moskowitz, Vice President
and General Counsel
Fax: (303) 799-0354
Notice to Muzak shall be provided as follows:
Muzak Limited Partnership
2901 Third Avenue, Suite 400
Suite 400
Seattle, WA 98121
Attention: President
Fax: (206) 623-6210
Notice given by mail shall be considered to have been given five (5) days after
the date of mailing, postage prepaid certified or registered mail. Notice given
by an overnight delivery service shall be considered to have been given on the
next business day. Notice given by facsimile shall be considered to have been
given on the date receipt thereof is confirmed during normal business hours,
with a hard copy to be mailed promptly thereafter.
13.2 Waiver. The failure of any party to insist upon strict
------
performance of any provision of this Agreement shall not be construed as a
waiver of any subsequent breach of the same or similar nature. All rights and
remedies reserved to either party shall be cumulative and shall not be in
limitation of any other right or remedy which such party may have at law or in
equity.
13.3 Binding Agreement; Assignment. This Agreement shall be binding
-----------------------------
upon the parties hereto and their respective successors and assigns, except that
it may not be assigned (by transfer or by operation of law) by either party
without the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that either party may assign this
Agreement without the prior written consent of the other party in connection
with the sale of all or substantially all of its assets or equity interests
(including any sale of
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 24
________________________________________________________________________________
equity interests effected through a merger). Notwithstanding the above, upon
thirty (30) days prior written notice, either party may assign this Agreement
without the other party's consent to an Affiliated Entity.
13.4 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Colorado applicable to contracts
made and fully performed therein by parties domiciled therein, without regard to
the conflicts of laws provisions thereof, except to the extent that the parties'
respective rights and obligations are subject to mandatory local, state and
federal laws or regulations.
13.5 Entire Agreement and Section Headings. This Agreement sets forth
-------------------------------------
the entire agreement and understanding of the parties relating to the subject
matter hereof. This Agreement shall not be modified other than in a writing,
signed by each of the parties hereto. The Section headings hereof are for the
convenience of the parties only and shall not be given any legal effect or
otherwise affect the interpretation of this Agreement.
13.6 Severability. The parties agree that each provision of this
------------
Agreement shall be construed as separable and divisible from every other
provision and that the enforceability of any one provision shall not limit the
enforceability, in whole or in part, of any other provision hereof. In the
event that a court of competent jurisdiction determines that a restriction
contained in this Agreement shall be unenforceable because of the extent of time
or geography, such restriction shall be deemed amended to conform to such extent
of time and/or geography as such court shall deem reasonable.
13.7 Confidentiality; Press Release.
------------------------------
(a) At all times during the Term and for a period of three (3)
years thereafter, the parties and their employees (and with respect to Muzak,
all Participating Muzak Affiliates must agree in writing to comply fully with
all of the confidentiality provisions of this Agreement prior to disclosure by
Muzak of any information regarding EchoStar, this Agreement and any other
agreements between the parties in any way related to this Agreement) will
maintain, in confidence, the terms and provisions of this Agreement, as well as
all data, summaries, reports or information of all kinds, whether oral or
written, acquired or devised or developed in any manner from the other party's
personnel or files, and that they have not and will not reveal the same to any
persons not employed by the other party (with the exception of Muzak Affiliates,
but solely for the purpose of seeking Affiliate Consent, and to perform if
Affiliate Consent is received) except: (i) at the written direction of such
party; (ii) to the extent necessary to comply with law, the valid order of a
court of competent jurisdiction or the valid order or requirement of the
Securities and Exchange Commission or any successor agency thereto, in which
event the disclosing party shall so notify the other party as promptly as
practicable (and, if possible, prior to making any disclosure) and shall seek
confidential
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 25
________________________________________________________________________________
treatment of such information; (iii) as part of its normal reporting or review
procedure to its parent company, its auditors and its attorneys, and such parent
company, auditors and attorneys agree to be bound by the provisions of this
Section 13.7; (iv) in order to enforce any of its rights pursuant to this
Agreement; (v) to affiliates, potential investors, insurers and financing
entities, and such affiliates, potential investors, insurers and financing
entities agree to be bound by the provisions of this Section 13.7; and (vi) to
the extent necessary to permit the performance of obligations under this
Agreement. EchoStar will be a named third party beneficiary of the agreements
of Participating Muzak Affiliates to comply with the terms of this provision.
(b) Promptly after the date of execution of this Agreement, the
parties shall use their reasonable best efforts to agree upon a mutually
acceptable press release with respect to the parties' general business
relationship under this Agreement and to jointly issue and release such press
release at a date and time mutually agreed upon.
13.8 Force Majeure. Neither EchoStar nor Muzak shall be responsible
-------------
for any failure or delay in the performance of any of their respective
obligations under this Agreement due to labor disputes, wars, riots, public
disorders, acts of God, labor dispute, natural disaster, technical failure
(including the failure of all or part of the domestic communications satellite,
or transponders on which the Video Services are delivered by EchoStar to
Subscribers, or of the related uplinking or other equipment) or any other reason
beyond the reasonable control of the party whose performance is prevented during
the period of such occurrence (any such event a "Force Majeure"). The Term shall
be suspended during the period when a party is unable to fulfill its obligations
hereunder by reason of such occurrence.
13.9 Dispute Resolution.
------------------
(a) Initial Dispute Resolution Procedures. Any dispute or
-------------------------------------
disagreement between EchoStar and Muzak arising out of this Agreement shall be
resolved according to the following dispute resolution procedure. First, such
dispute shall be addressed to each party's project manager (or equivalent level
manager) for discussion and attempted resolution. If any such dispute cannot be
resolved by such project managers within five (5) business days after the date
that either party gives notice that such dispute or disagreement exists, then
such dispute shall be immediately referred to the respective presidents for
discussion and attempted resolution.
(b) Subsequent Dispute Resolution Procedures. If a dispute
----------------------------------------
cannot be resolved to the mutual satisfaction of both parties within five (5)
business days (or such longer period as may be mutually agreed upon) after the
second-tier referral described in Section 13.9(a) above, then such dispute shall
be submitted to binding arbitration in Denver, Colorado pursuant to the then
applicable rules of the American Arbitration Association.
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 26
________________________________________________________________________________
13.10 Independent Contractors. The parties hereto acknowledge and
-----------------------
agree that the relationship established under the Agreement shall be that of
independent contractors. EchoStar and Muzak shall not be deemed partners or
joint venturers for one another for any purpose whatsoever.
13.11 Taxes, Fees, etc. Each party, at its expense, shall pay and
----------------
discharge all license fees, business, use, sales, gross receipts, income,
property or other similar taxes or assessments which may be charged or levied
upon such party.
13.12 No Franchise Relationship. Muzak acknowledges that EchoStar has
-------------------------
not required Muzak or any Participating Muzak Affiliates to pay any franchise
fee or other payment or to commit to pay any such fee or other payment as a
condition of the execution of this Agreement. Muzak represents and warrants to
EchoStar that Muzak does not and shall not deem or claim itself to be a
franchisee of EchoStar, either in relation to this Agreement, or for any
purpose, or under any applicable law. Muzak shall have sole responsibility for
compliance with any law relating to franchising with regards to its relationship
with Muzak Affiliates.
13.13 Compliance with Law. The parties shall comply with, and agree
-------------------
that this Agreement is subject to, all applicable federal, state and local laws,
rules and regulations, including, without limitation, all of the provisions of
the Communications Act of 1934 and all amendments thereto, now enacted or
hereafter promulgated in force during the term of this Agreement.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
ECHOSTAR SATELLITE CORPORATION
By: [SIGNATURE ILLEGIBLE]
-----------------------------
Name:
Title:
<PAGE>
VIDEO PROGRAMMING SALES AGENT AGREEMENT
MUZAK/ECHOSTAR
PAGE 27
________________________________________________________________________________
MUZAK LIMITED PARTNERSHIP
By: /s/ John R. Jester
----------------------------
Name: John R. Jester
Title: President
<PAGE>
Exhibit 10.10
<PAGE>
[Execution Copy]
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been
separately filed with the Commission.
MUZAK(R)
PARTICIPATING AFFILIATE AGREEMENT
This MUZAK(R) PARTICIPATING AFFILIATE AGREEMENT is made as of this __ day
of January, 1996 between Muzak Limited Partnership, a Delaware limited
partnership ("Muzak") and ______________________ ("Affiliate").
WHEREAS:
A. Muzak has entered into (i) an Uplink Facility Agreement (the "Uplink
Agreement"), (ii) a DBS Programming Affiliation Agreement (the "Programming
Agreement"), and (iii) a Video Programming Sales Agent Agreement (the "Video
Agreement", and collectively with the Uplink Agreement and the Programming
Agreement, the "EchoStar Agreements") dated December 28, 1995, with EchoStar
Satellite Corporation ("EchoStar"), copies of which are attached hereto as
Exhibits A-1, A-2 and A-3.
- -------------------------
B. Under the terms of the EchoStar Agreements, Muzak will provide certain
programming services to EchoStar, EchoStar will permit Muzak to use certain
programming uplink facilities, and EchoStar will grant to Affiliate and other
participating Muzak affiliates certain distribution rights with respect to
certain audio and video services distributed via EchoStar's direct broadcast
satellite system.
C. Pursuant to the terms of a Muzak(R) License Agreement Between Muzak
and Affiliate (the "License Agreement"), Affiliate, as licensee thereunder, has
the exclusive right to distribute certain music services and adjunct services
within a specific geographic area, as defined in the License Agreement (the
"Territory").
D. Muzak's performance under the EchoStar Agreements is conditioned upon
Affiliate's waiver of certain of its exclusive rights under the License
Agreement, and Affiliate's participation in the distribution of services over
EchoStar's direct broadcast satellite system is conditioned upon Affiliate's
execution of this Agreement.
E. In consideration of Affiliate's participation in the distribution of
services over EchoStar's direct broadcast satellite system, Muzak and Affiliate
desire to amend certain provisions of the License Agreement.
NOW, THEREFORE, the parties agree as follows:
1
<PAGE>
1. Definitions. The following capitalized terms shall have the meanings
-----------
ascribed to them in this Section 1. Terms used in this Agreement and not herein
defined are used with the meanings given such terms in the EchoStar Agreements.
"Combined Access Fees" shall mean the fees paid to EchoStar by each
Participating Muzak Affiliate for access to the EchoStar System to authorize
Commercial Subscribers to receive the Music Channels and the Exclusive Muzak
Channels, as more fully described in Section 4.3 of the Uplink Agreement.
"Commercial Subscribers" shall mean customers subscribing to an audio
and/or video service provided over the EchoStar System at retail, business,
office or other commercial locations.
"Commercial Subscriber Fee" shall mean the fee paid by EchoStar to each
Participating Muzak Affiliate for sales by EchoStar or EchoStar Dealers of the
Music Channels to Commercial Subscribers within such Participating Muzak
Affiliate's Territory, as more fully described in Section 2.7(a) of the
Programming Agreement.
"Commissions" shall mean the commissions paid by EchoStar to each
Participating Muzak Affiliate on sales of the Video Services, as more fully
described in Sections 6.1 and 6.2 of the Video Agreement.
"EchoStar Dealers" shall mean those persons or entities authorized by
EchoStar to act as agents of EchoStar to solicit orders for certain audio, video
and data programming services delivered Services via the EchoStar System, other
than the Participating Muzak Affiliates.
"Exclusive Muzak Channels" shall mean initially, the Environmental(R)
channel (east and west coast feed) and the FM-One(R) channel, and, upon
EchoStar's Second Satellite Launch, 2.4 megahertz of transponder capacity, on
the EchoStar System for exclusive commercial use by Muzak Affiliates, as more
fully described in Section 2.1 of the Uplink Agreement. The Exclusive Muzak
Channels shall at all times include the Environmental(R) channel and the FM-
One(R) channel and, after the Second Satellite Launch, any music channels
transmitted by Muzak on the Galaxy-4 satellite. Quantum Modulation(R) and
Stimulus Progression(R) will be incorporated into the Exclusive Muzak Channels
to the extent required under the License Agreement. The Exclusive Muzak Channels
shall predominantly consist of commercial music services.
"Music Channels" shall mean up to thirty (30) Commercial Music Channels and
Residential Music Channels programmed by Muzak for distribution over the
EchoStar System, as more fully described in Section 2.1 of the Programming
Agreement, and shall not include the Exclusive Muzak Channels.
2
<PAGE>
"New Product" shall have the meaning given to such term in Section 4 of
this Agreement.
"Participating Affiliate Dealer Agreement" shall have the meaning given to
such term in Section 3(d) of this Agreement.
"Participating Muzak Affiliates" shall mean the independent Muzak
affiliates that execute this Participating Affiliate Agreement.
"Residential Subscribers" shall mean customers subscribing to an audio
and/or video service provided over the EchoStar System at their homes.
"Uplink Fees" shall mean the fee paid to EchoStar by Muzak on behalf of
itself and all Participating Muzak Affiliates for the right to distribute the
Music Channels and the Exclusive Muzak Channels, as more fully described in
Section 4.1 of the Uplink Agreement.
"Video Service" shall mean the multi-channel commercial video service
distributed over the EchoStar System, as more fully described in Section 4 of
the Video Agreement.
2. Provision of Music Channels to EchoStar and EchoStar Dealers.
------------------------------------------------------------
Affiliate hereby acknowledges and agrees that, in accordance with the terms of
the EchoStar Agreements, Muzak will provide the Music Channels to EchoStar for
distribution by EchoStar or EchoStar Dealers to Commercial and Residential
Subscribers, and Muzak will provide the Exclusive Muzak Channels (except the FM-
One(R) and Environmental(R) channels) to EchoStar for distribution by EchoStar
or EchoStar Dealers only to Residential Subscribers. Affiliate hereby waives the
terms of Section 1.1 and clause (i) of Section 4.1 of the License Agreement with
respect to Music Services (as defined in the License Agreement) only to the
extent necessary to permit EchoStar Dealers to distribute the Music Channels to
Commercial and Residential Subscribers and the Exclusive Muzak Channels (except
the FM-One(R) and Environmental(R) channels) to Residential Subscribers in
accordance with the terms of the EchoStar Agreements. The foregoing waiver shall
only apply to EchoStar Dealers that are authorized by EchoStar to distribute the
Music Channels in the Territory, and (except with respect to EchoStar's post-
termination rights under the EchoStar Agreements) shall only apply for so long
as Affiliate is authorized to distribute the Music Channels and the Exclusive
Muzak Channels to Commercial Subscribers in the Territory. The foregoing waiver
shall not apply to distribution of the Music Channels by Muzak acting as an
EchoStar Dealer in the Territory, and Muzak will not distribute the Music
Channels, Exclusive Muzak Channels or Video Service in the Territory, except in
connection with the Muzak Multi-Territory Accounts Program or Section 7(d)
below.
3
<PAGE>
3. Distribution of EchoStar Services by Affiliate.
----------------------------------------------
(a) Affiliate shall be entitled to market and sell the Music
Channels to Commercial Subscribers and Residential Subscribers in the Territory,
and agrees to comply with all of the terms and provisions in the EchoStar
Agreements applicable to Affiliate and its distribution of such services.
(b) Affiliate shall be entitled to market and sell the Video Service
to Commercial and Residential Subscribers in the Territory, and agrees to comply
with all of the terms and provisions in the EchoStar Agreements applicable to
Affiliate and its distribution of such services.
(c) Affiliate shall have the exclusive right to distribute the
Exclusive Muzak Channels to Commercial Subscribers in the Territory in
accordance with the terms of the License Agreement, the exclusive right to
distribute the FM-One(R) and Environmental(R) channels to Residential
Subscribers in the Territory, and the nonexclusive right to distribute the
Exclusive Muzak Channels (other than the FM-One(R) and Environmental(R)
channels) to Residential Subscribers in the Territory in accordance with the
terms of the License Agreement.
(d) Affiliate's right to distribute the Video Service, and
Affiliate's right to distribute the Music Channels and the Exclusive Muzak
Channels (other than the FM-One(R) and Environmental(R) channels) to Residential
Subscribers, is conditioned upon Affiliate's execution of a Participating
Affiliate Dealer Agreement with EchoStar in substantially the form attached
hereto as Exhibit B (the "Participating Affiliate Dealer Agreement").
---------
(e) Affiliate shall not distribute the Music Channels, the Exclusive
Muzak Channels or the Video Service outside of the Territory. If Affiliate at
any time fails to comply with the terms or conditions of the EchoStar Agreements
applicable to it, or the Participating Affiliate Dealer Agreement, or materially
fails to comply with any material aspect of EchoStar's Policies and Procedures
Guidelines relating to the distribution of Video Services, Affiliate's right to
distribute Video Services shall terminate following notice and opportunity to
cure as provided in the Video Agreement.
(f) Muzak hereby waives the terms of Section 4.3(a) of the License
Agreement only to the extent necessary to permit Affiliate to distribute the
Video Service and the Music Channels to Commercial Subscribers and Residential
Subscribers in accordance with the terms of the EchoStar Agreements.
4. Right of First Refusal. In the event Muzak develops or introduces any
----------------------
product or service other than the Music Services and Adjunct Services (as
defined in the License Agreement) (a "New Product") for distribution by means of
the EchoStar System,
4
<PAGE>
The information below marked by [**] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.
Affiliate's right, if any, to distribute such New Product shall be determined as
follows: If such New Product has been or will be made available for distribution
by any of Muzak's owned affiliates or any third party then Muzak shall in good
faith extend to Affiliate a bona fide right of first refusal to distribute such
product on the same terms as available to Muzak's owned affiliates or such third
party. Affiliate shall accept or reject such offer within 30 days of its
receipt. If Affiliate does not accept such offer within such thirty day period,
Muzak shall be free to distribute the New Product in the Territory directly
through its owned affiliates or through any third party.
5. Royalty Fee.
-----------
(a) Section 6.3 of the License Agreement is hereby amended to read
in its entirety as follows:
"(a) Licensee shall pay to Muzak each month a royalty fee in the
amount of ten percent (10%) of Licensee's Gross Billings, as defined in
Section 6.8 below.
(b) In consideration of Muzak's development and implementation of
services for delivery over the EchoStar satellite system, Licensee shall
pay Muzak each month a surcharge (the "EchoStar Surcharge") equal to the
percentage of Licensee's Gross Billings as described in this paragraph (b).
The EchoStar Surcharge shall be effective as of first day of the first full
month after the date of Service Launch (the "Effective Date"). The EchoStar
Surcharge shall continue in effect until the earlier of such time as (x)
Licensor is no longer paying Uplink Fees, (y) the EchoStar Residential
Revenue (as hereinafter defined) is equal to or greater than [**],
or (z) after the fifth anniversary of the Effective Date, Licensor is
either (i) no longer transmitting services on the Galaxy-4 satellite (or
its replacement) or (ii) closes its Direct Broadcast Satellite facility
currently located at Raleigh, North Carolina and does not replace such
facility with a comparable facility other than the facility located at
Cheyenne, Wyoming. "EchoStar Residential Revenue" shall mean Licensor's
annualized revenue from Residential Subscriber Fees paid by EchoStar for
the immediately preceding calendar month, as shown on Licensor's unaudited
financial statements for such calendar month. Licensor shall provide an
annual report of EchoStar Residential Revenue on each anniversary of the
Effective Date to the President of the International Planned Music
Association (or its successor, the "IPMA"), and the President of the IPMA
shall have the right to review, upon thirty (30) days' prior written
notice, any documentation provided by EchoStar as is necessary to
5
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
confirm the EchoStar Residential Revenue. The President of the IPMA may
request such a review at any time, but not more often than once in any
twelve-month period. The EchoStar Surcharge shall be in the following
amounts: [**]
6
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. the omitted portion has been separately filed with
the Commission.
[**]
If EchoStar at any time elects to discontinue the Music Channels in
accordance with the EchoStar Agreements, the EchoStar Surcharge will be
increased by such amount as Licensor then incurs to distribute the
Exclusive Music Channels over the EchoStar System (including without
limitation, Uplink Fees, rent and operations expenses at EchoStar's Uplink
Facility, and all other direct costs associated with the provision of the
Exclusive Muzak Channels) prorated based on Licensee's percentage of total
royalty fees to Licensor from all Muzak affiliates, including owned
affiliates (which for purposes of this section shall be deemed to pay
royalty fees on the same basis as independent affiliates). Capitalized
terms used in this Section 6.3 and not herein defined are used with the
meanings given to such terms in the Uplink Facility Agreement, DBS
Programming Affiliation Agreement and Video Programming Sales Agent
Agreement, each dated as of December 28, 1995 between Licensor and EchoStar
Communications Corporation (the "EchoStar Agreements")."
(b) Section 6.8 of the License Agreement is hereby amended to read in
its entirety as follows:
"6.8 Gross Billings. "Gross Billings" means all amounts billed
--------------
or otherwise charged to a Subscriber by Licensee in connection with (1) the
provision of any Music Service, (2) the provision to Commercial Subscribers
of the Music Channels or the Exclusive Muzak Channels, (3) the lease or
rental (but not the sale) of Service Delivery Equipment and other equipment
used to receive and distribute such Music Service, Music Channels or
Exclusive Muzak Channels, including equipment used to receive the Music
Channels or Exclusive Muzak Channels in combination with the Video Service
distributed over the EchoStar System, but excluding equipment that is not
used primarily in the provision or reception of a Music Service. "Gross
Billings" shall also include the Commercial Subscriber Fees received by
Licensee for the sale of Music Channels to Commercial Subscribers by
EchoStar or EchoStar Dealers. Notwithstanding the foregoing, "Gross
Billings" shall not include:
(a) any amount billed or otherwise charged to a Subscriber by
Licensee for (i) the provision of any Music Service on Recorded
Media, (ii) Music-Related Adjunct Services, or (iii) the lease or
rental of any Service Delivery Equipment used with Recorded Media.
7
<PAGE>
(b) income to Affiliate from the sale or lease of any video
equipment (except for the lease of combined audio/video reception
equipment) to Commercial Subscribers or income to Affiliate from the
sale of any Music Channels to Residential Subscribers.
(c) any amounts billed to Subscribers as (and separately stated
on the billings or otherwise separately determinable as) sales or
similar excise taxes.
(d) one-time installation charges billed not later than ninety
(90) days following completion of such installation.
(e) charges for service of Subscriber-owned equipment, provided
that such charges are separately determinable.
(f) ad hoc (i.e., extraordinary) charges for service actually
----
performed on Subscriber-leased or Subscriber-owned equipment.
(g) late-payment penalties or interest charges imposed by
Licensee, provided that such penalties and charges do not exceed
standard industry practice.
Licensee may deduct from its Gross Billings (i) amounts paid by Licensee as
performing rights fees to ASCAP, BMI, or similar performing rights
organizations with respect to the Music Services (other than those
distributed by Recorded Media), the Music Channels, or Exclusive Muzak
Channels, and (ii) the amount of any billings that were previously reported
to Muzak as part of Licensee's Gross Billings but which, in the month of
the deduction, were written off by Licensee as uncollectible in accordance
with federal income tax standards of uncollectibility.
Capitalized terms used in this Section 6.8 and not herein defined are used
with the meanings given to such terms in the EchoStar Agreements."
6. Other Agreements.
----------------
(a) Muzak will not create, produce or assist in the creation or
production of any sales, marketing or advertising material for use by EchoStar
or EchoStar Dealers in the commercial marketplace.
8
<PAGE>
(b) Muzak will provide no sales training or sales incentives related
to the Music Channels for use by EchoStar or EchoStar Dealers in the commercial
marketplace.
(c) Muzak shall neither participate in or create any national or
regional sales program or assistance related to the Music Channels for use by
EchoStar or EchoStar Dealers in the commercial marketplace.
(d) In exercising its right to audit EchoStar under the EchoStar
Agreements, Muzak will act on behalf of itself and its owned and independent
affiliates as a whole.
(e) The parties acknowledge that the Video Agreement provides that
the terms and wholesale prices at which Affiliate and Muzak shall be entitled to
purchase the equipment identified on Schedule 9.1(a) thereto shall be no less
favorable than the terms and wholesale prices then available to distributors
which perform the same marketing, economic and promotional functions and which
purchases like quantities of equipment from EchoStar.
(f) Muzak represents to Affiliate that, under the terms of the
EchoStar Agreements, Muzak will provide EchoStar with between twenty-seven and
thirty Music Channels, and EchoStar will transmit the Exclusive Muzak Channels
in accordance with the terms of the EchoStar Agreements, subject to any
amendment of the EchoStar Agreements (which amendment may be subject to
Affiliate's consent in accordance with Section 7(a) below).
(g) Muzak shall not utilize EchoStar Dealers to provide any Music
Service or Adjunct Service to any National Account, except to the extent that
Muzak may utilize an EchoStar Dealer as a subcontractor in accordance with
Muzak's Multi-Territory Account Program (as set forth in Exhibit G to the
License Agreement) or Section 7(d) below. Muzak shall not refer any commercial
subscriber account for Music Service or Adjunct Service (as defined in the
License Agreements) to EchoStar or any EchoStar Dealer.
(h) Muzak shall provide a list of EchoStar Dealers in the Territory
to Affiliate, if and when such a list is provided to Muzak by EchoStar.
(i) If a termination event described in Section 12.2(c) of the Video
Agreement, Section 10.2(c) of the Uplink Agreement and Section 9.2(c) of the
Programming Agreement occurs, but Muzak does not elect to terminate the EchoStar
Agreements, the International Planned Music Association (or its successor
organization), acting through its board of directors, may by written notice to
Muzak, require Muzak to terminate the EchoStar Agreements in accordance with the
procedures set forth therein.
9
<PAGE>
7. EchoStar Agreements.
-------------------
(a) Affiliate represents and warrants that, in performing its
obligations hereunder and under the Participating Affiliate Dealer Agreement, it
shall not knowingly and intentionally act in a manner that will cause Muzak to
breach the terms of the EchoStar Agreements as they now exist or are hereafter
amended. Muzak shall obtain Affiliate's prior written consent to any amendments
to the EchoStar Agreements that will affect the rights, duties, or obligations
of, or benefits received by, Affiliate, and will promptly notify Affiliate in
writing (or electronically) of any amendments or modifications to the EchoStar
Agreements, whether or not affecting the rights, duties or obligations of, or
benefits received by, Affiliate. Except to the extent set forth in this
Agreement, Affiliate shall have no liability to Muzak under the EchoStar
Agreements. Muzak will promptly disclose to Affiliate in writing (or
electronically) the terms of any other agreements between Muzak and EchoStar or
any third party relating to the distribution on the EchoStar System of the Music
Channels, the Exclusive Muzak Channels, or the Video Service, or the purchase of
equipment for the reception or distribution of such services, if such
agreements, or the terms of such agreements are different than those offered to
Affiliate. Affiliate will promptly disclose to Muzak in writing the terms of any
other agreements between Affiliate and EchoStar or any third party relating to
the distribution on the EchoStar System of the Music Channels, the Exclusive
Muzak Channels, or the Video Service, or the purchase of equipment for the
reception or distribution of such services, if such agreements, or the terms of
such agreements, are different than those offered to Muzak.
(b) Affiliate shall indemnify and hold harmless Muzak and the
EchoStar Indemnities from, against and with respect to any and all claims,
damages, liabilities, costs and expenses (including reasonable attorneys' and
experts' fees) (collectively, "Damages") incurred in connection with any claim
against any of the EchoStar Indemnities arising out of: (i) Affiliate's breach
of any provision of this Agreement, (ii) Affiliate's marketing and distribution
of the Music Channels, the Exclusive Muzak Channels or the Video Service, (iii)
any performance rights fees payable in connection with Affiliate's distribution
of the Music Channels or the Exclusive Muzak Channels to Commercial Subscribers,
or (iv) Affiliate's failure to perform any of the obligations applicable to it
under the EchoStar Agreements. In addition, Affiliate shall pay and hold the
EchoStar Indemnities and Muzak harmless from any federal, state or local taxes
or fees that are based upon revenues derived by, or the operations of,
Affiliate.
(c) Affiliate shall comply with and perform all obligations,
covenants, representations and warranties applicable to Participating Muzak
Affiliates under the EchoStar Agreements. EchoStar is a third party beneficiary
with respect to Affiliate's obligations under this paragraph (c).
10
<PAGE>
(d) In the event that Affiliate fails to perform its obligations
hereunder in the manner provided herein, and EchoStar notifies Muzak in writing
that, as a result thereof (either alone or in combination with other breaches by
other Muzak Affiliates), Muzak is in material breach of one or more of the
EchoStar Agreements, Muzak shall give Affiliate written notice specifying the
nature of Affiliate's failure to perform. If Affiliate does not cure such
failure within seventy-two (72) hours after the date of delivery or mailing of
such notice (or such shorter period as may be required by the EchoStar
Agreements), Muzak (directly or through a subcontractor) shall have the option,
exercisable immediately upon notice to Affiliate, to perform the obligations and
exercise the rights (including the rights to receive payments with respect to
any affected subscriber account) of Affiliate hereunder, and Affiliate shall
reimburse Muzak for the costs associated therewith.
8. Term. This Agreement shall commence as of the date hereof and shall
----
terminate at the earlier of (i) the termination of the EchoStar Agreements (it
being understood that Affiliate enjoys the same post-termination rights as Muzak
under the EchoStar Agreements) or (ii) the termination of the License Agreement.
9. Miscellaneous.
-------------
(a) If and to the extent that war, government restrictions
(excluding the imposition of wage and price controls by any governmental
agency), embargoes, civil commotion, strikes, labor unrest, fires, breakdown,
failure or shortage of materials or equipment, acts of God or any other similar
conditions beyond the control of a party shall prevent such party from
performing its obligations under this Agreement or under any other agreement or
instrument specifically referred to herein, such party (and the other party to
the extent that the other party's performance is dependent upon the performance
so prevented) shall be excused from such performance during the existence of any
such conditions.
(b) Each party hereby agrees to indemnify, defend and hold harmless
the other party from all third-party claims directly or indirectly resulting
from or arising out of any act or omission by such party or such party's
officers, directors, employees, assignees, or agents pursuant to or in
connection with this Agreement.
(c) At all times during the term of the EchoStar Agreements and for
a period of three (3) years thereafter, Affiliate and its employees will
maintain, in confidence, the terms and provisions of this Agreement and the
EchoStar Agreements, and will not reveal the same to any persons except (i) at
the written direction of Muzak; (ii) to the extent necessary to comply with law
or the order of a court of competent jurisdiction, in which event Affiliate
shall notify Muzak as promptly as practical (and, if possible, prior to making
any disclosure) and shall seek
11
<PAGE>
confidential treatment of such information; (iii) as part of its normal
reporting or review procedure to its parent company, its auditors and its
attorneys, and such parent company, auditors and attorneys agree to be bound by
the provisions of this Section 10(c); (iv) in order to enforce any of its rights
pursuant to this Agreement; (v) to affiliates, potential investors, insurers and
financial entities; (vi) to the extent necessary to permit the performance of
obligations under this Agreement; and (vii) to the extent readily available in
public records or documents.
(d) This Agreement constitutes the entire agreement and understanding
of the parties hereto with respect to the subject matter hereof and supersedes
all other prior agreements, understandings, discussions, projections, and
presentations, written or oral, between the parties hereto with respect to the
subject matter hereof, and this Agreement may be amended, modified or
supplemented only by a written instrument signed by each of the parties hereto.
Muzak makes no warranties or representations as to the costs or benefits to
Affiliate of entering into this Agreement.
(e) No waiver of any term or condition contained in this Agreement
shall be effective unless it is signed by the party claimed to be bound by the
waiver. The waiver of any term or condition of this Agreement by any party shall
not be construed as a waiver of any subsequent breach or failure of the same
term or condition, or as a waiver of any other term or condition of this
Agreement.
(f) In case any one or more of the provisions contained herein shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or the remainder of such provision or provisions,
but such provision or provisions shall be ineffective only to the extent of such
invalidity, illegality or unenforceability, without invalidating the remainder
of such provision or provisions or the remaining provisions of this Agreement,
and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision or provisions had never been contained herein, unless
the deletion of such provision or provisions would substantially deny a party
the benefit of the bargain negotiated.
(g) This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties hereto and is not intended
to confer upon any other person any rights or remedies hereunder. Muzak shall
not assign this Agreement separate from an assignment of the License Agreement.
Affiliate shall not assign its rights or delegate its obligations under this
Agreement without the prior written consent of Muzak, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, Affiliate may assign its
rights and delegate its duties hereunder to any person who shall have been
approved by Muzak as the assignee and delegee of Affiliate's rights and duties
under the License
12
<PAGE>
agreement. Without limiting the foregoing, all references in this Agreement to
the License Agreement between Muzak and Affiliate shall mean the License
Agreement in effect as of the date hereof or any successor License Agreement
between Muzak and Affiliate (or their respective successors-in-interest with
respect to any such License Agreement).
(h) Any notices or other communications provided for hereunder shall,
unless otherwise stated herein, be in writing and hand-delivered or sent by
certified mail, postage prepaid, or sent by express overnight mail, postage
prepaid, to each party, at its address set forth below (or at such other address
as shall be designated for such purpose by such party in a written notice to the
other party hereto):
(i) If to Muzak, at:
2901 Third Avenue, Suite 400
Seattle, WA 98121
Attention: John R. Jester
(ii) If to Affiliate, at:
_____________________________
_____________________________
Attention: __________________
(i) This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement, and shall become a
binding agreement when one or more counterparts have been signed by each of the
parties hereto and delivered to the other party hereto.
(j) Titles and headings to Sections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
(k) All disputes of any kind, nature or description arising in
connection with the terms and conditions of this Agreement shall be submitted to
the American Arbitration Association, in the city and state in which Affiliate's
principal place of business is located, for arbitration under its prevailing
rules. The arbitrator(s) will be selected as follows. The parties shall attempt
to agree upon a single arbitrator. If the parties are not able to so agree, each
of the parties shall, by written notice to the other, have the right to appoint
one arbitrator. If, within ten (10) days following the giving of notice by one
party, the other party shall not, by written notice, appoint another arbitrator,
the first arbitrator shall be the sole arbitrator. If two arbitrators are so
appointed, they shall appoint a third arbitrator. If the two arbitrators are
unable to agree upon the third arbitrator within ten (10) days after the
appointment of the second arbitrator, the third arbitrator will be appointed by
the
13
<PAGE>
American Arbitration Association. The arbitration decision shall be binding and
conclusive on the parties and the judgment may be, but is not required to be,
entered in the court having jurisdiction. The prevailing party in such
arbitration shall be entitled to receive its costs, expenses and reasonable
attorneys' fees in an amount to be determined by the arbitrator(s).
(l) Except as specifically amended herein, the License Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
Affiliate's right to distribute the Music Services and Adjunct Services (as
defined in the License Agreement) by means other than the EchoStar System is
unaffected by this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MUZAK LIMITED PARTNERSHIP
By: __________________________
Its: _________________________
AFFILIATE:
______________________________
By: __________________________
Its: _________________________
14
<PAGE>
Exhibit 10.11
<PAGE>
THIRD AND BROAD
OFFICE LEASE
THIS LEASE, made the 8th day of June, 1994, by and between MARTIN
SELIG on behalf of the marital community of Martin Selig and Andrea Selig, whose
address is 1000 Second Avenue, Suite 1800, Seattle, Washington, 98104-1046,
hereinafter referred to as "Lessor" and MUZAK LIMITED PARTNERSHIP, a Delaware
limited partnership, whose address upon lease inception will be 2901 Third
Avenue, Suite 400, Seattle, Washington 98121, hereinafter referred to as
"Lessee".
1. DESCRIPTION, Lessor in consideration of the agreements contained
-----------
in this lease, does hereby lease to Lessee, upon the terms and conditions
hereinafter set forth, that certain space consisting of approximately 43,324
rentable square feet * (hereinafter referred to as "Premises") situated on the
4th floor level of the Third & Broad Building, 2901 Third Avenue, City of
Seattle, State of Washington 98121, the legal description of which is:
Lots 1, 2, 3, 4, 5, 6, 9, 10, 11, 12, Block X,
William N. Bell's Fourth Addition to the City
of Seattle, according to the Plat recorded in
Volume 1 of Plats, Page 167, records of King
County, Washington; together with the vacated
alley lying between lots 9, 10, 11, and 12 and
Lots 1, 2, 3, 4, 5, and 6.
* Rentable square feet shall be calculated according to the Building
owners and Managers Association International ("BOMA") Standards, namely, the
"Standard Method for Measuring Floor Area in Office Buildings American National
Standard," ANSI Z 65.1-1980 (Revisions of ANSI Z 65.1-1972) approved July 31,
1980, by the American National Standards Institute, Inc.
2. TERM, The term of this lease shall be for a period of one
----
hundred twenty (120) months, commencing the date of occupancy or substantial
completion whichever occurs first, which is approximately the 1st day of
December, 1994, and ending one hundred twenty (120) months thereafter. Lessor
shall use its best efforts to have the Premises ready for occupancy on such
date.
In the event Lessee occupies the Premises prior to December 1, 1994,
then Lessee shall continue to pay its lease payment at the Burke Building.
Lessee shall pay Lessor for the actual rentable square footage occupied prior to
December 1, 1994, less the Burke Building payment of $37,256.43, provided the
Third & Broad rent is greater than the Burke Building rent. Early occupancy
shall not modify the lease commencement date from December 1, 1994.
In the event the Premises are not ready for occupancy on the date set
forth above, whether occasioned by Lessor or Lessee, lease term shall be
extended in such a manner as to reflect the delay occasioned by the failure of
the Premises to be ready for occupancy. In no event shall Lessor or Lessee be
liable for any further damages.
3. RENT, Lessee covenants and agrees to pay Lessor rent each
----
month in advance on the first day of each calendar month. Rent shall be computed
at the annual base rental rate of see Paragraph 37. Rent for any fractional
calendar month, at the beginning or end of the term, shall be the pro rated
portion of the rent computed on an annual basis.
4. CONSIDERATION, As consideration for the execution of this lease,
-------------
Lessee has this date paid to Lessor the sum of $61,375.66, receipt of which is
hereby acknowledged. Unless Lessee materially breaches the terms and conditions
of this lease and fails to cure the same, an amount equal to such sum shall be
credited against the twelfth month's rental of the lease tern of this lease.
<PAGE>
5. USES, Lessee agrees that Lessee will use and occupy said
----
Premises for general offices and other purposes related to the conduct of
Lessee's business and for no other purposes.
6. RULES AND REGULATIONS, Lessee and their agents, employees,
---------------------
servants or those claiming under Lessee will at all times observe, perform and
abide by all of the Rules and Regulations printed on this instrument, or which
may be hereafter reasonably promulgated by Lessor, all of which it is covenanted
and agreed by the parties hereto shall be and are hereby made a part of this
lease.
7. CARE AND SURRENDER OF PREMISES, Lessee shall take good care of
------------------------------
the Premises and shall promptly repair any damage caused by Lessee, except those
required herein to be made by Lessor. At the expiration or sooner termination
of this lease, Lessee, without notice, will immediately and peacefully quit and
surrender the Premises in good order, condition and repair (damage by reasonable
wear, the elements or fire excepted). Lessee shall be responsible for removal
of all personal property from the Premises, excepting fixtures (being that which
is attached to the Premises) and property of the Lessor. If Lessee fails to
remove the same upon lease expiration, then Lessor shall have the right to
remove said property and Lessee shall be responsible for all costs associated
therewith, including cleaning and dumpster fees, provided, however, Lessee shall
have fifteen (15) days after lease termination for removal of special equipment
related to the studios.
8. ALTERATIONS, Lessee shall not make any alterations or
-----------
improvements in, or additions to said Premises without first obtaining the
written consent of Lessor, which consent shall not be unreasonably withheld. All
such alterations, additions and improvements shall be at the sole cost and
expense of Lessee and shall become the property of Lessor and shall remain in
and be surrendered with the Premises as a part thereof at the termination of
this lease, without disturbance, molestation or injury.
9. RESTRICTIONS, Lessee will not use or permit to be used in said
------------
Premises anything that will increase the rate of insurance on said building or
any part thereof, nor anything that may be dangerous to life or limb; nor in any
manner deface or injure said building or any part thereof; nor overload any
floor or part thereof; nor permit any objectionable noise or odor to escape or
to be emitted from said Premises, or do anything or permit anything to be done
upon said Premises in any way tending to create a nuisance or to disturb any
other tenant or occupant of any part of said building. Lessee, at Lessee's
expense, will comply with all health, fire and police regulations respecting
said Premises. The Premises shall not be used for lodging or sleeping, and no
animals or birds will be allowed in the building.
10. WEIGHT RESTRICTIONS, Safes, furniture or bulky articles may be
-------------------
moved in or out of said Premises only at such hours and in such manner as will
least inconvenience other tenants, which hours and manner shall be at the
discretion of Lessor. No safe or other article of over 2,000 pounds shall be
moved into said Premises without the consent of Lessor, and Lessor shall have
the right to locate the position of any article of weight in said Premises if
Lessor so desires.
11. SIGN RESTRICTION, No sign, picture, advertisement or notice
----------------
shall be displayed, inscribed, painted or affixed to any of the glass or
woodwork of the building without the prior approval of Lessor, which approval
shall not be unreasonably withheld.
12. LOCKS, No additional locks shall be placed upon any doors of the
-----
Premises. Keys will be furnished to each door lock. At the termination of the
lease, Lessee shall surrender all keys to the Premises whether paid for or not.
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<PAGE>
13. KEY, Lessor, his janitor, engineer or other agents may retain
---
a pass key to said Premises to enable him to examine the Premises from time to
time with reference to any emergency or to the general maintenance of said
Premises.
14. TELEPHONE SERVICE, If Lessee desires telephonic or any other
-----------------
electric connection, Lessor will direct the electricians as to where and how the
wires are to be introduced, and without such directions no boring or cutting for
wires in installation thereof will be permitted.
15. SERVICES, Lessor shall maintain Premises in a first class
--------
manner and the public and common areas of building, such as lobbies, stairs,
corridor and restrooms, landscaping, exterior lighting, roof patio, and the
heating, air-conditioning and other utilities serving the Premises, in
reasonably good order and condition except for damage occasioned by the act of
Lessee.
Lessor shall furnish Premises with electricity for lighting and
operation of standard power usage office machines, heat, normal office air-
conditioning, and elevator services, at no cost to Lessee except in the case of
an actual increase in Base Year Costs, as provided in Paragraph 19. Lessor shall
also provide lighting replacement for Lessor furnished lighting, toilet room
supplies, window washing with reasonable frequency, and customary janitor
service. Lessor agrees that Lessee's usage of electricity for Lessee's business
operation is standard power usage.
Lessor shall not be liable to Lessee for any loss or damage caused by
or resulting from any variation, interruption or any failure of said services
due to any cause whatsoever. No temporary interruption or failure of such
services incident to the making of repairs, alterations, or improvements, or due
to accident or strike or conditions or events not under Lessor's control shall
be deemed as an eviction of Lessee or relieve Lessee from any of Lessee's
obligations hereunder; provided, however, in the event utility services for the
Premises are interrupted for seventy-two (72) consecutive hours or more, and in
the further event that Lessee as a result thereof cannot operate its business
from the standpoint of prudent business management, then the basic rental and
all other amounts payable by Lessee under the lease shall abate commencing with
the 73rd hour until service is restored for space rendered untenantable.
In the event of any lack of attention on the part of Lessor and any
dissatisfaction with the service of the building, or any unreasonable annoyance
of any kind, Lessee is requested to make complaints at Lessor's building office
and not to Lessor's employees or agents seen within the building. Lessee is
further requested to remember that Lessor is as anxious as Lessee that a high
grade service be maintained, and that the Premises be kept in a state to enable
Lessee to transact business with the greatest possible ease and comfort. The
rules and regulations are not made to unnecessarily restrict Lessee, but to
enable Lessor to operate the building to the best advantage of both parties
hereto. To this end Lessor shall have the right to waive from time to time such
part or parts of these rules and regulations as in his judgment may not be
necessary for the proper maintenance or operation of the building or consistent
with good service, and may from time to time make such further reasonable rules
and regulations as in his judgment may be needed for the safety, care and
cleanliness of the Premises and the building and for the preservation of order
therein.
16. SOLICITORS, Lessor will make an effort to keep solicitors out
----------
of the building, and Lessee will not oppose Lessor in his attempt to accomplish
this end.
17. FLOOR PLAN, The floor plan and specifications for Lessee's
----------
occupancy shall be attached hereto and marked Exhibit "A" which shall be
approved by both Lessor and Lessee, both of whose approval shall not be
unreasonably withheld.
-3-
<PAGE>
18. ASSIGNMENT, Lessee will not assign this lease, or any interest
----------
hereunder, and this lease, or any interest hereunder, shall not be assigned by
operation of law. Lessee will not sublet said Premises or any part thereof and
will not permit the use of said Premises by others other than Lessee and the
agents of Lessee without first obtaining the written consent of Lessor. In the
event such written consent shall be given, no other or subsequent assignment or
subletting shall be made without the previous written consent of Lessor. In the
event Lessee desires to assign or sublet said Premises or any part thereof,
Lessor shall have the first right, but not the obligation to re-lease the
Premises. Notwithstanding the foregoing and notwithstanding any other
provisions of this lease, Lessor hereby consents to the assignment by Lessee of
this lease to (a) a company incorporated or to be incorporated by Lessee
provided that Lessee owns or beneficially controls at least half of the issued
and outstanding shares of such company or that Lessee and such company are under
common control of the same parent entity, or (b) an affiliated entity or a
purchaser of all or substantially all of Lessee's assets or equity interests.
19. OPERATING SERVICES AND REAL ESTATE TAXES, The annual base rental
----------------------------------------
rate per rentable square foot in Paragraph 3 includes Lessee's proportionate
share of Operating Services and Real Estate Taxes for the first twelve months of
the lease term, "Base Year Costs." Only actual increases from these Base Year
Costs, if any, will be passed on to Lessee on a proportionate basis.
DEFINITIONS
Base Year
- ---------
For computing the Base Year Costs, the base year shall be the calendar year
stated herein or if a specific calendar year is not stated herein then the base
year shall be the calendar year in which the lease tern commences. The base
year shall be the calendar year 1995.
Comparison Year
- ---------------
The Comparison Year(s) shall be the calendar year(s) subsequent to the base
year.
Operating Services
- ------------------
"Operating Services" include, but are not limited to, the charges incurred by
Lessor for: building operation salaries, benefits, management fee of five
percent (5%) of gross income for the building, insurance, electricity,
janitorial, supplies, telephone, HVAC, repair and maintenance, window washing,
water and sewer, security, landscaping, disposal, elevator, etc. Operating
Services shall also include the amortization cost of capital investment items
and of the installation thereof, which are primarily for the purpose of safety,
saving energy or reducing operating costs, or which may be required by
governmental authority, (all such costs shall be amortized over the reasonable
life of the capital investment item, with the reasonable life and amortization
schedule being determined in accordance with generally accepted accounting
principles). Notwithstanding anything to the contrary contained herein,
Operating Services shall not include any of the following:
(i) legal fees, auditing fees, brokerage commissions,
advertising costs, or other related expenses incurred by Lessor in an effort to
generate rental income;
(ii) repairs, alterations, additions, improvements, or
replacements made to rectify or correct any defect in the original design,
materials or workmanship of the building or common areas (but not including
repairs, alterations, additions, improvements or replacements made as a result
of ordinary wear and tear);
-4-
<PAGE>
(iii) damage and repairs attributable to fire or other casualty;
(iv) damage and repairs necessitated by the negligence or willful
misconduct of Lessor, Lessor's employees, contractors or agents;
(v) executive salaries to the extent that such services are not
in connection with the management, operation, repair or maintenance of the
building;
(vi) Lessor's general overhead expenses not related to the
building;
(vii) legal fees, accountant's fees and other expenses incurred in
connection with disputes with tenants or other occupants of the building or
associated with the enforcement of the terms of any leases with tenants or the
defense of Lessor's title to or interest in the building or any part thereof
unless the outcome is to the financial benefit of all tenants;
(viii) costs (including permit, license and inspection fees)
incurred in renovating or otherwise improving, decorating, painting or altering
(1) vacant space (excluding common areas) in the building or (2) space for
tenants or other occupants in the building and costs incurred in supplying any
item or service to less than all of the tenants in the building;
(ix) costs incurred due to a violation by Lessor or any other
tenant of the building of the terms and conditions of a lease;
(x) cost of any specific service provided to Lessee or other
occupants of the building for which Lessor is reimbursed (but not including
Operating Services and Real Estate Tax increases above Base Year Costs to the
extent reimbursed Lessor) or any other expense for which Lessor is or will be
reimbursed by another source (i.e., expenses covered by insurance or
warranties);
(xi) costs and expenses which would be capitalized under
generally accepted accounting principles, with the exception of the capital
investment items specified hereinabove;
(xii) building management fees in excess of the management fees
specified hereinabove;
(xiii) cost incurred with owning and/or operating the parking
lot(s) serving the building by independent parking operator(s).
(xiv) fees paid to Lessor or any affiliate of Lessor for goods or
services in excess of the fees that would typically be charged by unrelated,
independent persons or entities for similar goods and services;
(xv) rent called for under any ground lease or master lease;
(xvi) principal and/or interest payments called for under any debt
secured by a mortgage or deed of trust on the building; and
Operating Services shall be adjusted for the Base Year and all Comparison
Year(s) to reflect the greater of actual occupancy or 95% occupancy.
Real Estate Taxes
- -----------------
Real Estate Taxes shall be the taxes paid by Lessor in the base year and each
respective Comparison Year.
-5-
<PAGE>
Proportionate Basis
- -------------------
Lessee's share of Base Year and Comparison Year(s) Costs shall be a fraction,
the numerator of which shall be the number of rentable square feet contained in
the leased Premises (see Paragraph 1) and the denominator of which shall be the
number of rentable square feet in the building in which the leased Premises are
located (241,263/RSF).
Computation of Adjustment to Base Year Costs
- --------------------------------------------
Any adjustment to Base Year Costs will commence to occur in Month 13 of the
lease term with subsequent adjustments commencing every twelve months of the
lease term or in Months 25, 37, 49, etc. as appropriate under the lease term.
Lessee shall be responsible for any increase between Lessee's proportionate
share of Base Year Costs and Lessee's proportionate share of each respective
Comparison Year(s) Costs. The increase shall be the increase to each expense
individually. These costs shall be initially calculated based on estimated
(projected) costs with reconciliation to actual costs when annual audited
numbers are completed. For the purpose of calculating projected increases to
Base Year Costs, Lessor shall review historical data to predict if any estimated
increases would be anticipated in a Comparison Year(s). If they are, then
commencing in Month 13 and/or every twelve month period thereafter, Lessor will
assess a monthly charge to be paid together with monthly base rent. once actual
cost data for Comparison Year(s) Real Estate Taxes and Operating Services for
the entire building is formulated in accordance with generally accepted
accounting principles and adjusted to the greater of actual occupancy or 95%
occupancy, then Lessee's estimated pass-through costs shall be corrected with
Lessee or Lessor, as appropriate, reimbursing the other for the difference
between the estimated and actual costs, at that time in a lump sum payment.
Upon termination of this lease, the amount of any corrected amount between
estimated and actual costs with respect to the final comparison year shall
survive the termination of the lease and shall be paid to Lessee or Lessor as
appropriate within thirty (30) days after final reconciliation.
Computation of or adjustment to Operating Services and/or Real Estate Taxes
pursuant to this paragraph or to rent pursuant to Paragraph 3 shall be computed
based on a three hundred sixty-five (365) day year.
For an example, see Exhibit B attached hereto.
Notwithstanding the other provisions of this lease, the pass-through of all
Operating services (excluding Real Estate Taxes and Insurance) as described in
Paragraph 19 shall not exceed 5% per year of the operating expenses on a
cumulative basis. For example, if in years 2 & 3, Lessee's total escalation
charges increased by 4% and 5% respectively then, in year 4 if costs increase by
8%, then Lessor can charge Lessee a maximum increase of 6% or a total escalation
cost increase of 15% over the three subsequent years after year 1.
Lessee shall have the right to audit Lessor's books and records for the
Operating Services with reasonable advance notice.
20. ADDITIONAL TAXES OR ASSESSMENTS. Should there presently be in
-------------------------------
effect or should there be enacted during the term of this lease, any law,
statute or ordinance levying any assessment or any tax upon rents or the income
from real estate or rental property (other than federal or state income taxes),
Lessee shall reimburse Lessor for Lessee's proportionate share of said expenses
at the same time as rental payments.
21. LATE PAYMENTS. Any payment, required to be made pursuant to this
-------------
lease, not made on the date the same is due shall bear interest at a rate equal
to three percent (3%) above the prime
-6-
<PAGE>
rate of interest charged from time to time by Seafirst National Bank, or its
successor.
In addition to any interest charged herein, a late charge of five
percent (5%) of the payment amount shall be incurred for payments received more
than five (5) days late.
Provided, however, in the event Lessee timely cures a monetary
payment, then the stated herein shall only be applicable commencing with the
fourth late payment.
22. RISK. All personal property of any kind or description
----
whatsoever in the demised Premises shall be at Lessee's sole risk. Lessor shall
not be liable for any damage done to or loss of such personal property or damage
or loss suffered by the business or occupation of the Lessee arising from any
acts or neglect of co-tenants or other occupants of the building, or of Lessor
or the employees of Lessor, or of any other persons, or from bursting,
overflowing or leaking of water, sewer or steam pipes, or from the heating or
plumbing or sprinklering fixtures, or from electric wires, or from gas, or
odors, or caused in any other manner whatsoever except in the case of negligence
on the part of Lessor. Lessee shall keep in force throughout the term of this
lease such casualty, general liability and business interruption insurance as a
prudent tenant occupying and using the Premises would keep in force.
23. INDEMNIFICATION. Lessee will defend, indemnify and hold harmless
---------------
Lessor from any claim, liability or suit including attorney's fees on behalf of
any person, persons, corporations and/or firm for any injuries or damages
occurring in or about the said Premises or on or about the sidewalk, stairs, or
thoroughfares adjacent thereto where said damages or injury was caused or
partially caused (except that if partially caused, Lessee shall be obligated
hereunder only to the extent of the causation) by the ordinary or gross
negligence or intentional act of Lessee and/or by Lessee's agents, employees,
servants, customers or clients.
24. WAIVER OF SUBROGATION. Lessee and Lessor do hereby release and
---------------------
relieve the other, and waive their entire claim of recovery for loss, damage,
injury, and all liability of every kind and nature which may arise out of, or be
incident to, fire and extended coverage perils, in, on, or about the Premises
herein described, whether due to negligence of either of said parties, their
agents, or employees, or otherwise.
25. SUBORDINATION. This lease and all interest and estate of Lessee
-------------
hereunder is subject to and is hereby subordinated to all present and future
mortgages and deeds of trust affecting the Premises or the property of which
said Premises are a part. Lessee agrees to execute at no expense to the Lessor,
any instrument which may be deemed necessary or desirable by the Lessor to
further effect the subordination of this lease to any such mortgage or deed of
trust. In the event of a sale or assignment of Lessor's interest in the
Premises, or in the event of any proceedings brought for the foreclosure of, or
in the event of exercise of the power of sale under any mortgage or deed of
trust made by Lessor covering the Premises, Lessee shall attorn to the purchaser
and recognize such purchaser as Lessor. Lessee agrees to execute, at no expense
to Lessor, any estoppel certificate deemed necessary or desirable by Lessor to
further effect the provisions of this paragraph. Notwithstanding the foregoing
and notwithstanding any other provisions of this lease, Lessee shall not be
obligated to subordinate its interests under this lease unless the holder of the
mortgage or deed of trust or other interest in the Premises to which Lessee's
interest is to be subordinated provides Lessee with assurances in form and
substance reasonably satisfactory to Lessee that Lessee's tenancy will not be
disturbed by such interest holder.
26. CASUALTY. In the event the leased Premises or the said
--------
building is destroyed or injured by fire, earthquake or other casualty to the
extent that they are untenantable in whole or in
-7-
<PAGE>
part, then Lessor may, at Lessor's option, proceed with reasonable diligence to
rebuild and restore the said Premises or such part thereof as may be injured as
aforesaid, provided that within sixty (60) days after such destruction or injury
Lessor will notify Lessee of Lessor's intention to do so, and during the period
from time of casualty and such rebuilding and restoration the rent shall be
abated on the portion of the Premises that is unfit for occupancy. If necessary,
Lessor will provide access to any needed alternative space for Lessee at the
fair market rate not to exceed Lessee's rental rate hereunder.
27. INSOLVENCY. If Lessee becomes insolvent, or makes an
----------
assignment for the benefit of creditors, or a receiver is appointed for the
business or property of Lessee, or a petition is filed in a court of competent
jurisdiction to have Lessee adjudged bankrupt, then Lessor may at Lessor's
option terminate this lease. Said termination shall reserve unto Lessor all of
the rights and remedies available under Paragraph 28 ("Default") hereof, and
Lessor may accept rents from such assignee or receiver without waiving or
forfeiting said right of termination. As an alternative to exercising his right
to terminate this lease, Lessor may require Lessee to provide adequate
assurances, including the posting of a cash bond, of Lessee's ability to perform
its obligations under this lease.
28. DEFAULT. If this lease is terminated in accordance with any of
-------
the terms herein (with the exception of Paragraph 27), or if Lessee vacates or
abandons the Premises or if Lessee shall fail at any time to keep or perform any
of the covenants or conditions of this lease, i.e. specifically the covenant for
the payment of monthly rent, and such failure is not cured within five (5)
business days after receipt by Lessee from Lessor of written notice of such
failure, then, and in any of such events Lessor may with or without notice or
demand, at Lessor's option, and without being deemed guilty of trespass and/or
without prejudicing any remedy or remedies which might otherwise be used by
Lessor for arrearages or preceding breach of covenant or condition of this
lease, but subject to all applicable laws, enter into and repossess said
Premises and expel the Lessee and all those claiming under Lessee. In such
event Lessor may eject and remove from said Premises all goods and effects
(forcibly if necessary). This lease if not otherwise terminated may immediately
be declared by Lessor as terminated. The termination of this lease pursuant to
this Article shall not relieve Lessee of its obligations to make the payments
required herein. In the event this lease is terminated pursuant to this Article,
or if Lessor enters the Premises without terminating this lease and Lessor
relets all or a portion of the Premises, Lessee shall be liable to Lessor for
all the costs of reletting, including necessary renovation and alteration of the
leased Premises. Lessee shall remain liable for all unpaid rental which has been
earned plus late payment charges pursuant to Paragraph 21 and for the remainder
of the term of this lease for any deficiency between the net amounts received
following reletting and the gross amounts due from Lessee, or if Lessor elects,
Lessee shall be immediately liable for all rent and additional rent (Paragraph
19) that would be owing to the end of the term, less any rental loss Lessee
proves could be reasonably avoided, which amount shall be discounted by the
discount rate of the Federal Reserve Bank, situated nearest to the Premises,
plus one percent (1%).
29. BINDING EFFECT. The parties hereto further agree with each
--------------
other that each of the provisions of this lease shall extend to and shall, as
the case may require, bind and inure to the benefit, not only of Lessor and
Lessee, but also of their respective heirs, legal representatives, successors
and assigns, subject, however, to the provisions of Paragraph 18 of this lease.
It is also understood and agreed that the terms "Lessor" and "Lessee"
and verbs and pronouns in the singular number are uniformly used throughout this
lease regardless of gender, number or fact of incorporation of the parties
hereto. The typewritten riders or supplemental provisions, if any, attached or
added hereto
-8-
<PAGE>
are made a part of this lease by reference. It is further mutually agreed that
no waiver by Lessor of a breach by Lessee of any covenant or condition of this
lease shall be construed to be a waiver of any subsequent breach of the same or
any other covenant or condition.
30. HOLDING OVER. If Lessee holds possession of the Premises after
------------
term of this lease, Lessee shall be deemed to be a month-to-month tenant upon
the same terms and conditions as contained herein, except rent which shall be
revised to reflect the then current market rate, provided, however, the first
three months of rent shall continue at the same rent Lessee is paying on the
last month of this lease prior to expiration. During month-to-month tenancy,
Lessee acknowledges Lessor will be attempting to relet the Premises. Lessee
agrees to cooperate with Lessor and Lessee further acknowledges Lessor's
statutory right to terminate the lease with proper notice.
31. ATTORNEY'S FEES. If any legal action is commenced to enforce any
---------------
provision of this lease, the prevailing party shall be entitled to an award of
reasonable attorney's fees and disbursements. The phrase "prevailing party"
shall include a party who receives substantially the relief desired, whether by
dismissal, summary judgment, judgment or otherwise.
32. NO REPRESENTATIONS. The Lessor has made no representations or
------------------
promises except as contained herein or in some future writings signed by Lessor.
33. QUIET ENJOYMENT. So long as Lessee pays the rent and performs
---------------
the covenants contained in this lease, Lessee shall hold and enjoy the Premises
peaceably and quietly, subject to the provisions of this lease.
34. RECORDATION. Lessee shall not record this lease without the
-----------
prior written consent of Lessor. However, at the request of Lessor, both parties
shall execute a memorandum or "short form" of this lease for the purpose of
recordation in a form customarily used for such purpose. Said memorandum or
short form of this lease shall describe the parties, the Premises and the lease
term, and shall incorporate this lease by reference.
35. MUTUAL PREPARATION OF LEASE. It is acknowledged and agreed that
---------------------------
this lease was prepared mutually by both parties. In the event of ambiguity, it
is agreed by both parties that it shall not be construed against either party as
the drafter of this lease.
36. GOVERNING LAW. This lease shall be governed by, construed and
-------------
enforced in accordance with the laws of the State of Washington.
37. BASE RENTAL RATE. The annual base rental rate per rentable
----------------
square foot shall be as follows:
Years 1-5: $17.00 per rentable square foot *
Years 6-10: $18.00 per rentable square foot *
* Monthly Payment Breakdown
<TABLE>
<CAPTION>
T/I Payment Rent/Payment
----------- ------------
<S> <C> <C>
Months: 1 - 60 23,319 38,057
Months: 61 - 120 13,215 51,771
</TABLE>
38. FINISH WORK. The space will be completed in accordance with
-----------
mutually agreed upon working drawings based on the space plan layout by Emick
Howard Nelson & Seibert, Inc. dated February 24, 1994, which will be completed
on a turn-key basis at the cost to the Lessor. The tenant improvement finishes,
design, specifications and build-out shall be completed similar in quality to
Lessee's existing Premises in the Burke Building and Lessee's
-9-
<PAGE>
tenant work specifications, entitled "Preliminary Tenant Improvement Pricing
Package, The Burke Building - 2nd and 3rd floors, Muzak, March 23, 1994
("Lessee's Specifications"). The quantity of improvements shall be greater as
Lessee is occupying more rentable square footage. In the event of conflict
between Lessee's Specification and the finishes, design, specifications and
buildout of Lessee's existing Premises in the Burke Building then the existing
Premises finishes, design, specifications and built-out detail shall be
controlling.
Lessor shall recarpet and repaint the common areas after the fifth
year of the lease, if necessary, as determined by Lessee in Lessee's reasonable
discretion.
39. DESIGN SERVICES. Lessor, at Lessor's expense, will provide all
---------------
additional space planning, design, documentation and contract administration
with Lessor's in-house staff. Lessor will furthermore contract with and pay for
its engineers, such as structural, mechanical, electrical and fire protection,
for all work to coincide with the working drawings. Lessor has as of the date
of this lease paid Emick Howard Nelson & Seibert, Inc. partial payment and shall
pay Emick Howard Nelson & Seibert, Inc. an additional amount of $7,423.00 for
space planning plus up to $.50 per rentable square foot for preliminary planning
and design services.
40. RENEWAL OPTION. Lessee shall have the right to renew this
--------------
lease under the same terms and conditions, except rent, for two (2), five year
period(s), provided Lessee is not in materially continuing default under the
terms and conditions of this Lease. Base Rent for the renewal term shall be at
fair market value. Lessee must give notice of its election to renew at least 180
days prior to the expiration of the then lease term.
41. THIRD RIGHT OF OFFER. Lessor will provide Lessee with a right of
--------------------
third refusal on the 3rd floor, subject to existing rights of first and second
refusal Lessor currently has provided to Active Voice and AT&T. If Lessor has
an interested party for that space, Lessor will notify Lessee accordingly and
Lessee shall have ten (10) working days from receipt of said notice in which to
respond either way. Rent for the adjacent space shall be at fair market value.
42. TELECOMMUNICATION AND COMPUTER WIRING. Lessor will provide
-------------------------------------
Lessee up to a $1.00 per rentable square foot allowance for telecommunication
and computer wiring. Lessee shall present Lessor with invoices evidencing the
actual cost of these services. Lessee shall offset the actual costs of these
services from Lessee's first months rental payment after occupancy.
43. STORAGE SPACE. Lessor will use its best faith efforts to
-------------
provide, if requested, up to 750 rentable square feet of dead storage space
within the building's garage at the dead storage rate of $9.00 per rentable
square foot.
44. SIGNAGE. Lessee, at Lessee's sole expense, shall have the
-------
pedestal signage on the exterior of the building. Design and location of signage
is subject to Lessor's approval which approval shall not be unreasonably
withheld.
45. SATELLITE DISH. Lessee, at Lessee's expense, shall have the
--------------
right to place four satellite dishes, in a mutually agreeable location, on the
building's roof. There shall be no additional rental charged to Lessee for this
right to place the dishes on the roof. Such equipment may be removed by Lessee
at any time and, notwithstanding any other provisions of this lease, shall not
become the property of the Lessor. Lessee shall repair any physical damage to
the roof or structure as a result of such removal. The satellite dish shall
operate in accordance with FCC requirements and shall not interfere with the
transmission and operation of other dishes.
-10-
<PAGE>
46. LEASE CANCELLATION. Lessee shall have the right to cancel or
------------------
reduce a portion of this lease effective only upon the sixtieth (60th) month of
the initial lease term by providing Lessor with twelve (12) months prior written
notice.
Lessee shall be entitled to cancel this lease only in the event Lessee ceases
maintaining its headquarters in Western Washington. Lessee may, however, reduce
the size of the Premises in the event Lessee's headquarters office requirements
are reduced or if Lessee elects to relocate a portion of its offices outside
Western Washington. Any reduction shall not exceed 21,664 rentable square feet
in one contiguous mutually agreeable leasable space with elevator access for
entry.
If Lessee cancels this lease, then Lessee shall pay Lessor a cancellation fee of
$600,000.00 which fee shall be due at the time Lessee vacates the Premises. If
Lessee reduces a portion of its offices and surrenders a pro rata portion of its
Premises, the cancellation fee shall be pro rated.
47. PARKING. Lessee shall be provided ninety (90) parking stalls for
-------
Lessee's employees, with at least sixty (60) of those stalls within the
building's parking garage. The balance of the stalls shall be located outside
the building in as close proximity as possible. Lessor will use its best faith
efforts to accommodate the remaining thirty (30) stalls within the building's
garage, if available. The payment terms and monthly parking rate for the
parking stalls used shall be as follows:
Months 1 - 30: First sixty (60) inside stalls free,
next thirty (30) stalls at rate
specified below
Months 31 - 60: First fifty (50) inside stalls free,
next forty (40) stalls at rate
specified below
Months 61 - 120: First forty (40) inside stalls free,
next fifty (50) stalls at rate
specified below
Rates: Year 1: $50.00 per stall per month, plus sales tax
Year 2: $55.00 per stall per month, plus sales tax
Year 3: $60.00 per stall per month, plus sales tax
Year 4: $65.00 per stall per month, plus sales tax
Year 5: $70.00 per stall per month, plus sales tax
Years 6 - 10: $90.00 per stall per month, plus sales tax
After the sixtieth (60th) month of the initial lease term, Lessee has the right
to lease up to an additional twenty (20) outside parking stalls at the then
current market rate.
48. CONSENT AND WAIVER AGREEMENT. Lessor shall execute and deliver
----------------------------
to Lessee, in connection with the execution of the lease, three originals of the
Consent and Waiver Agreement attached hereto as Exhibit C.
49. ESTOPPEL CERTIFICATE. Within ten (10) days after notice by
--------------------
Lessor or Lessee to the other party, the other party shall execute and deliver
to the party delivering notice a certificate stating, if true, that this lease
is unmodified and in full
-11-
<PAGE>
force and effect, or is in full force and effect as modified and stating the
modifications. The certificate shall also state the amount of the monthly rent,
the dates to which rent has been paid in advance, the amount of any security
deposits paid to Lessor, whether the party making such certificate is in default
under the lease or is aware of any default by the other party, and such other
matters as the requesting party may reasonably request.
50. BROKER'S COMMISSION. Lessor shall pay an agent's fee of $4.00
-------------------
per rentable square foot to Steven C. Johnson & Associates. Lessor agrees to
tender the lease deposit to Steven C. Johnson & Associates as partial payment of
this fee. In addition, if Lessor does not pay this amount, Lessee shall have the
right to offset the commission, not to exceed $5,000.00 per month.
51. OFFSET. In the event Lessor does not pay for all or any
------
portion of the Finish Work improvements, Design Services, Telecommunication and
Computer Wiring Allowance, Broker's Commission or any other obligations pursuant
to this lease, Lessee shall have the right to pay the actual costs of the
obligations incurred and offset said amount(s) paid from Lessee's rent payable
pursuant to this lease. Interest shall accrue on any outstanding balance at the
annual interest rate of nine percent (9%) per annum.
IN WITNESS WHEREOF, the parties hereof have executed this lease the
day and year first above written.
MUZAK LIMITED PARTNERSHIP, a Delaware
limited partnership
/s/ Martin Selig /s/ John Jester
- ----------------------------- ----------------------------------------
Martin Selig By: John Jester
-------------------------------------
Its: President
------------------------------------
"Lessor" "Lessee"
Attachment
-12-
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 8th day of June , 1994, before me, a Notary Public in and for the State
--- ---- --
of Washington, personally appeared MARTIN SELIG, the individual who executed the
within and foregoing instrument, and acknowledged said instrument to be his free
and voluntary act and deed, for the uses and purposes therein mentioned.
[SIGNATURE ILLEGIBLE]
--------------------------------
Notary Public in and for the
[SEAL] State of Washington, residing at
_______________________
My commission expires: 6/1/98
--------
(Individual)
STATE OF WASHINGTON )
) ss.
COUNTY OF )
On this _____ day of June ____________, 19__, before me, a Notary
Public in and for the State of _______________ , personally appeared
_____________________, the individual(s) who executed the within and foregoing
instrument, and acknowledged said instrument to be his/her/their free and
voluntary act and deed, for the uses and purposes therein mentioned.
____________________________________
Notary Public in and for the
State of Washington, residing
at _________________________________.
My commission expires:______________
(Partnership)
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 8th day of June , 1994 , before me, a Notary Public in and for the State
--- ---- --
of Washington , personally appeared John B. Jester , to me known to be
---------- --------------
partner(s) of Muzak , the partnership that executed the foregoing instrument,
-------
and acknowledged said instrument to be the free and voluntary act and deed of
said corporation, for the uses and purposes therein mentioned, and on oath
stated that he/she/they is/are authorized to execute said instrument on behalf
-- --
of the partnership.
[SIGNATURE ILLEGIBLE]
-----------------------------
Notary Public in and for the
State of Washington, residing
[SEAL] at _______________________
My commission expires: 6/1/98
-------
(Corporation)
STATE OF WASHINGTON )
) ss.
COUNTY OF )
On this _____ day of _______________, 19___, before me, a Notary Public in and
for the State of _________________, personally appeared ___________________, to
me known to be the _____________________________________, respectively of
____________________________, the corporation that executed the within and
foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he/she/they is/are authorized to execute said
instrument and that the seal affixed is the corporate seal of said corporation.
______________________________
Notary Public in and for the
State of Washington, residing
at __________________________.
My commission expires:________
<PAGE>
Exhibit 10.12
<PAGE>
BACKGROUND/FOREGROUND MUSIC SERVICE LICENSE AGREEMENT
AGREEMENT made between the AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND
PUBLISHERS (hereinafter called "SOCIETY"), located at One Lincoln Plaza, New
York, New York 10023 and (hereinafter called "LICENSEE"), located at as follows:
1. SCOPE OF LICENSE. SOCIETY grants to LICENSEE and LICENSEE accepts for
the period commencing June 1, 1994 and ending May 31, 1999, a non-exclusive
license to perform publicly, or cause to be performed publicly, in the United
States, its territories and possessions, non-visually, by means of
"Background/Foreground Music Service" (as hereinafter defined) and not
otherwise, in the premises of "Subscribers of LICENSEE" (as hereinafter defined)
and not elsewhere, non-dramatic renditions of the separate musical compositions
of which SOCIETY shall, during the term hereof, have the right to license such
performing rights. This license does not extend to or include the public
performance of any rendition or performance of any opera, operetta, musical
comedy, play, or like production as such, in whole or in part.
Except as expressly herein otherwise provided, nothing herein contained
shall be construed as authorizing LICENSEE to grant to others any right to
reproduce or perform by any means, method or process whatsoever, any of the
musical compositions licensed hereunder, or as authorizing "Subscribers of
LICENSEE" to perform or reproduce compositions licensed hereunder by any method
or process whatsoever except the reproduction of such compositions by means of
equipment at the premises of such "Subscribers of LICENSEE" designated in the
agreement between each such respective Subscriber and LICENSEE.
The term "Background/Foreground Music Service" as used in this agreement
shall mean: (1) the transmission to the premises of "Subscribers of LICENSEE" of
renditions of musical compositions (whether vocal or instrumental); or (2) the
furnishing of the means to make such renditions in the premises of "Subscribers
of LICENSEE," or by transmissions to persons outside of the premises by means of
a music-on-hold telephone system operated by the Subscriber at its premises,
provided such renditions are limited to those made by the mechanical
reproduction of music by equipment made available by LICENSEE to its Subscribers
only, and not by equipment otherwise available to the general public.
The term "Subscribers of LICENSEE", as used in this agreement, shall mean
all persons, firms and corporations subscribing to the said
Background/Foreground Music Service. Any person, firm or corporation which is
furnished with a Background/Foreground Music Service by a third party, but which
is billed for such service only by LICENSEE, or which is billed for such service
by a third party authorized to perform such billing by LICENSEE for the benefit
of LICENSEE, shall be deemed to be a Subscriber of LICENSEE, provided that
LICENSEE shall cause such third party to furnish SOCIETY upon entering into this
Agreement and on or before each succeeding January 1, April 1, July 1 and
October 1 during the term hereof, a list of all Subscribers billed in such
manner. Such lists shall specify the name of each such Subscriber and the total
number of Subscribers of LICENSEE So billed.
2. LIMITATIONS ON LICENSE.
A. This license shall not extend to or be deemed to include or authorize
the recording of, or the manufacture of any recordings or any other device used
as a means of reproducing, any musical composition of which the right of
performance is licensed under this agreement.
B. This license shall not under any circumstance extend to (i) any
premises to which an admission fee is charged at the time LICENSEE'S
Background/Foreground Music Service is provided, or at which dancing in
conjunction with LiCENSEE's Background/Foreground Music Service occurs; or (ii)
any broadcast transmission by any television station or radio station; or (iii)
any transmission by any cable television or cable radio operation, to any
private home, apartment, guest room in a hotel or motel, or other similar
location; or (iv) any transmission by any Background/Foreground Music Service to
any private home, apartment, guest room in a hotel or motel, or other similar
location.
C. This license shall not extend to or be deemed to include or authorize
the public performance of any musical composition licensed hereunder at any
premises during any month in which the subscriber uses commercial announcements
in conjunction with LICENSEE'S Background/Foreground Music Service, if such
commercial announcements are provided by an entity wholly unrelated to LICENSEE,
and LICENSEE receives no consideration whatsoever for the performance of such
commercial announcements; provided, however, that this license shall be deemed
to include and authorize such performances if LICENSEE shall have paid the
appropriate monthly license fee for such premises specified in Sub-Paragraph
"5.C." hereof, as provided in Paragraph "6" hereof. As used in this Sub-
Paragraph "2.C." the term "wholly unrelated to LICENSEE" shall mean an entity in
which LICENSEE has no ownership interest, over which LICENSEE has no control,
and with which LICENSEE has no contractual relation regarding the performance of
such commercial announcements at the premises of the subject Subscriber, and the
term "LICENSEE receives no consideration" shall mean that no compensation for
the performance of such commercial announcements (in money or any other form) is
paid to LICENSEE, directly or indirectly, for such announcements.
3. LICENSEE'S WARRANTIES.
A. LICENSEE warrants, represents and agrees that the fees set forth in
Paragraph "5" of this agreement will be paid by LICENSEE with respect to all
premises to which any Background/Foreground Music Service is furnished directly
or indirectly by LICENSEE or any enterprise which controls, is controlled by, or
is under the same control as, LICENSEE.
B. LICENSEE further warrants and represents that each and every one of
its agreements with its Subscribers hereafter made, as well as all renewals or
extensions of existing agreements, will contain the following provision:
"The Subscriber shall not transmit the programs nor use the service outside
the premises designated in this agreement."
4. LIST OF COMPOSITIONS.
LICENSEE agrees to furnish to SOCIETY during the term of this agreement,
commencing with the receipt of a written request therefor from SOCIETY, a list
of all the musical compositions included in LICENSEE'S
<PAGE>
Background/Foreground Music Service and furnished to Subscribers of LICENSEE.
Such list shall specify the title of each musical composition, its composer and
author, and the date of performance at the premises of Subscribers of LICENSEE
(if known). Should SOCIETY request such list, it will be sufficient for LICENSEE
to furnish to SOCIETY any printed form of program furnished by LICENSEE to its
Subscribers; however, should SOCIETY notify LICENSEE in writing that such
printed form of program does not meet the requirements of this provision,
LICENSEE shall furnish to SOCIETY, no more than ninety days after such written
notification, a list which does meet those requirements.
5. LICENSE FEES.
In consideration of the license herein granted, LICENSEE agrees to pay
SOCIETY with respect to each premises of each Subscriber of LICENSEE to which
LICENSEE'S Background/Foreground Music Service is furnished, the following
license fees:
A. The appropriate annual license fee set forth below for each premises
of each Subscriber other than the premises specifically mentioned in Sub-
Paragraphs "B" and "C" of this Paragraph "5," without exception or deduction for
any reason, including, but not limited to: hotels, motels, night clubs,
restaurants, bars, grills, taverns, cocktail lounges and other establishments in
which food or beverages are served, stores, shops, supermarkets, health clubs,
automobile showrooms, gasoline service stations and other establishments where
goods or services are sold or offered to the public at retail, and each such
premises located in a shopping center:
<TABLE>
<CAPTION>
Contract Year Annual License Fee
------------- ------------------
<S> <C>
June 1, 1994 - May 31, 1995 $46.25
June 1, 1995 - May 31, 1996 47.00
June 1, 1996 - May 31, 1997 48.00
June 1, 1997 - May 31, 1998 48.75
June 1, 1998 - May 31, 1999 49.50
</TABLE>
B. The appropriate annual license fee set forth below for each of the
following premises of each Subscriber only: an office, factory or plant; a bank;
an office or a professional building; a doctor's, dentist's or other
professional office; a hospital, clinic, nursing or rest home or rehabilitation
center; a funeral home or mortuary; a library, school, college or university; a
church; a private club owned and operated by the members as a non-commercial
venture; an apartment house or residence; a governmental office; a park or
recreation area owned and operated by the government excluding private or
commercial concessions or leased areas; a garage; a security or commodity
broker; an insurance or real estate agency; a finance or loan office; a savings
and loan association; a warehouse; a trucking terminal which is limited to
operators of such trucks and maintenance men and to which other members of the
public are not generally admitted; a research organization or laboratory; a room
occupied solely as a rest room (or lounge); a room occupied solely as a
reception or information area or an employee's cafeteria in such respective
premises; and each such premises located in a shopping center:
<TABLE>
<CAPTION>
Contract Year Annual License Fee
------------- -------------------
<S> <C>
June 1, 1994 - May 31, 1995 5.00% of "gross billings," for
all such premises
June 1, 1995 - May 31, 1996 5.00% of "gross billings," for
all such premises
June 1, 1996 - May 31, 1997 5.00% of "gross billings," for
all such premises
June 1, 1997 - May 31, 1998 5.00% of "gross billings," for
all such premises
June 1, 1998 - May 31, 1999 5.00% of "gross billings," for
all such premises
</TABLE>
C. The appropriate monthly license fee set forth below for each premise
of each Subscriber which used commercial announcements in conjunction with
LICENSEE'S Background/Foreground Music Service, subject to the provisions of
Sub-Paragraph "2.C." hereof; provided, however, that should a subscriber insert
public address announcements concerning goods or services sold or offered to the
public at its premises, where no compensation (in money or any other form) is
paid to anyone, directly or indirectly, for such announcements, then the license
fee payable for said Subscriber shall be that specified in Sub-Paragraphs "A"
and "B" of this Paragraph "5," as appropriate:
<TABLE>
<CAPTION>
Contract Year Monthly License Fee Per Floor
------------- ------------------------------
<S> <C>
June 1, 1994 - May 31, 1995 $5.14
June 1, 1995 - May 31, 1996 5.22
June 1, 1996 - May 31, 1997 5.33
June 1, 1997 - May 31, 1998 5.42
June 1, 1998 - May 31, 1999 5.50
</TABLE>
D. As used in this agreement, the term "gross billings" shall:
(i) include all sums (including the reasonable value of any
merchandise, service, or anything of value in lieu of or in
addition to cash consideration) due to LICENSEE from its
Subscribers in connection with (a) its provision of its
Background/Foreground Music Service: and (b) its lease (including
conditional sale) of equipment to Subscribers used in connection
with such Background/Foreground Music Service;
(ii) exclude all sums due to LICENSEE from its Subscribers only for
the following: (a) bona fide sale (not including conditional
sale) of equipment; (b) the lease of equipment to Subscribers
which is extraneous and unrelated to such Background/Foreground
Music Service; (c) any sales, use or excise taxes which are
collected from Subscribers and actually paid to any Federal,
State or local taxing authority; (d) one-time installation
charges billed not later than 90 days following completion of the
subject installation work; (e) all ad hoc charges (i.e.,
extraordinary or one-time charges) for service and maintenance
work actually performed on subscriber-leased or subscriber-owned
equipment provided that said ad hoc charges are separately
billed, not later than 90 days following the completion of the
subject service and maintenance work; (f) the license fees paid
to SOCIETY pursuant to this agreement; (g) the amount of any
billings (previously included as "gross billings") which are
written off as uncollectible, provided, however, that any amounts
written off as uncollectible that are later collected shall be
reported as and when collected; (h) any penalties for late
payments or finance or interest charges imposed on Subscribers by
LICENSEE.
E. For each premises for which a fee is payable under Sub-Paragraphs "A"
or "C" of this Paragraph "5," and for which the agreement between the Subscriber
of LICENSEE and LICENSEE shall commence on any day from the first through the
fifteenth day of any month, or terminate on any day from the sixteenth through
the last day of any month, the fee shall be paid in full for such month. For
each such premises for which such agreement shall commence on any day from the
sixteenth through the last day of any month, or terminate on any day from the
first through the fifteenth day of any month, no fee shall be payable for such
month.
<PAGE>
F. The minimum total due SOCIETY under this agreement shall be as
follows:
<TABLE>
<CAPTION>
Contract Year Minimum Monthly License Fee
------------- ---------------------------
<S> <C>
June 1, 1994 - May 31, 1995 $144
June 1, 1995 - May 31, 1996 148
June 1, 1996 - May 31, 1997 152
June 1, 1997 - May 31, 1998 156
June 1, 1998 - May 31, 1999 160
</TABLE>
If LICENSEE has not been engaged in the background/foreground music business for
six months, this provision shall not apply until LICENSEE shall have completed
six months in said business.
6. REPORTS AND PAYMENTS.
A. LICENSEE shall submit monthly reports to SOCIETY setting forth
separately the following:
(i) "Gross billings" to all Subscribers;
(ii) "Gross billings" to all Subscribers described in Paragraph
"5.A.," and the amounts excluded from "gross billings" for each item set forth
in Paragraph "5.D.ii.";
(iii) The number of all Subscribers described in Paragraph "5.A.";
(iv) "Gross billings" to all Subscribers described in Paragraph
"5.B.," and the amounts excluded from "gross billings" for each item set forth
in Paragraph "5.D.ii.";
(v) The number of all Subscribers described in Paragraph "5.B.";
(vi) "Gross billings" to all Subscribers described in Paragraph
"5.C.," and the amounts excluded from "gross billings" for each item set forth
in Paragraph "5.D.ii.";
(vii) The number of all subscribers described in Paragraph "5.C.";
(viii) The license fees payable to SOCIETY pursuant to the terms of this
agreement for the month covered by the report.
(ix) The names and addresses of all suppliers of music used in
LICENSEE'S Background/Foreground Music Service.
B. LICENSEE shall submit said monthly reports on or before the last day
of each month, covering the period of the preceding calendar month.
C. SOCIETY shall supply forms for said monthly statements free of charge
to LICENSEE.
D. LICENSEE shall remit, with each monthly report, the full amount of
license fees shown due for the month covered by the report.
E. Accountings and payments shall be made on a billing basis. LICENSEE
shall have a right of reduction or rebate for all bad accounts which are written
off as uncollectible, provided, however, that any accounts that are written off
as uncollectible that are later collected in whole or in part shall be reported
and paid for as and when collected.
F. If any monthly payment required by Paragraph "5" or "6" is not
received by SOCIETY within fifteen days after the date it was due, LICENSEE
agrees to pay SOCIETY a finance charge of 1% per month from the date the payment
was due.
7. AUDITS.
A. SOCIETY shall have the right by its duly authorized representatives,
at any time during customary business hours, to examine the books and records of
account of LICENSEE to such extent as may be necessary to verify any and all
statements rendered and accountings made hereunder, and under prior license
agreements with SOCIETY.
B. SOCIETY shall give LICENSEE not less than forty-five days' written
notice of its intention to make such an examination.
C. LICENSEE shall give SOCIETY's auditor full access to all relevant
records of LICENSEE, including names and addresses of, and any other pertinent
information concerning, the Subscribers of LICENSEE. SOCIETY agrees to instruct
its auditors not to make any list of names and addresses of Subscribers of
LICENSEE except insofar as necessary for the verification of LICENSEE'S
statements and accountings to SOCIETY, and to destroy any such list upon
completion of the audit or, if a deficiency be found as to which such data may
be relevant, upon the payment or other disposition of such audit deficiency.
D. In the event any such audit shows LICENSEE to have underpaid the
license fees due SOCIETY by 5% or more, LICENSEE shall pay a finance charge on
the license fees shown due of 1% per month from the date(s) the license fees
should have been paid pursuant to this agreement.
E. In the event any such audit shows LICENSEE to have underpaid the
license fees due SOCIETY by less than 5%, LICENSEE shall pay a finance charge on
the license fees shown due of 1% per month from the date SOCIETY demands payment
of such amount.
8. RIGHT TO RESTRICT. SOCIETY reserves the right, at any time and from
time to time, in good faith, to restrict the performance of compositions from
musical comedies, operas, operettas, and motion pictures, or any other
composition being excessively performed, only for the purpose of preventing
harmful effect upon such musical comedies, operas, operettas, motion pictures or
compositions, in respect of other interests under the copyrights thereof;
provided, however, that the maximum number of compositions which may be at any
time thus restricted shall not exceed three hundred and moreover that limited
licenses will be granted upon application entirely free of additional charge as
to restricted compositions, if and when the copyright owners thereof are unable
to show reasonable hazards to their major interests likely to result from such
performances; and provided further that SOCIETY shall not exercise such right to
restrict any such composition for the purpose of permitting the fixing or
regulating of fees for the recording or transcribing of such composition; and
provided further that in no case shall any charges, "free plugs" or other
consideration be required in respect of any permission granted to perform a
restricted composition; and provided further that in no event shall any
composition, after the initial radio or television broadcast thereof, be
restricted for the purpose of confining further performances thereof to a
particular program or licensee.
SOCIETY reserves the right, at any time and from time to time, in good
faith, to restrict the performance of any compositions, over and above the
number specified in the previous paragraph, only as to which any suit has been
brought or threatened on a claim that such composition infringes a composition
not contained in SOCIETY's repertory or on a claim that SOCIETY does not have
the right to license the performing rights in such composition.
<PAGE>
9. BREACH AND DEFAULT. Upon any breach or default by LICENSEE of any
terms herein contained, SOCIETY may give LICENSEE thirty days notice in writing
to cure such breach or default, and in the event such breach or default has not
been cured within the said thirty days, SOCIETY may then forthwith terminate
this license.
10. INDEMNIFICATION. SOCIETY agrees to indemnify, save and hold LICENSEE
and the respective Subscribers of LICENSEE harmless, and defend LICENSEE and
such Subscribers from and against any claim, demand or suit that may be made or
brought against it with respect to renditions given on LICENSEE's programs
during the term hereof in accordance with this license, of the separate musical
compositions copyrighted or composed by members of SOCIETY and in SOCIETY's
repertory.
In the event of the service upon LICENSEE or any such Subscriber of any
notice, process, paper or pleading, under which a claim, demand or action is
made or begun against LICENSEE or any such Subscriber on account of any such
matter as is hereinabove referred to, LICENSEE shall promptly give SOCIETY
written notice thereof, and SOCIETY at its own expense shall have sole charge of
the defense of any such action or proceeding. LICENSEE, however, shall have the
right to engage counsel of its own, at its own expense, who may participate in
the defense of any such action or proceeding and with whom counsel for SOCIETY
shall cooperate. LICENSEE shall cooperate with SOCIETY in every way in the
defense of any such action or proceeding, and in any appeals that may be taken
from any judgments or orders entered therein, and shall execute all pleadings,
bonds or other instruments, but at the sole expense of SOCIETY, that may be
required in order properly to defend and resist any such action or proceeding,
and prosecute any appeals taken therein.
In the event of the service LICENSEE or any such notice, process, paper or
pleading under which a claim, demand or action is made or begun against LICENSEE
on account of the rendition of any musical composition contained in SOCIETY's
repertory but not copyrighted or composed by members of SOCIETY, SOCIETY agrees
at the request of LICENSEE to cooperate with and assist LICENSEE in the defense
of any such action or proceeding, and in any appeals that LICENSEE may elect to
take from any judgments or orders therein.
11. NOTICES. All notices required or permitted to be given by either of
the parties to the other hereunder shall be duly and properly given if mailed to
such other party by registered or certified United States mail, addressed to
such other party at its main office for the transaction of business.
12. LIMITED RIGHT OF ASSIGNMENT. If LICENSEE shall cease to operate the
Background/Foreground Music service referred to in this agreement and if
LICENSEE shall have discharged all the obligations of LICENSEE to SOCIETY under
this agreement, then LICENSEE shall have the right to assign this agreement for
the balance of its term upon the express condition that such assignee shall
accept such assignment and shall agree to assume and to carry out and perform
all the terms and conditions of this agreement on the part of the LICENSEE to be
kept and performed for the balance of the term of this agreement. Upon such
acceptance and assumption, LICENSEE shall be relieved of any future obligations
hereunder. Except as hereinabove expressly provided, LICENSEE shall have no
right to transfer or assign this agreement, the rights granted hereunder being
personal to LICENSEE.
13. LIMITED RIGHT OF TERMINATION. If LICENSEE shall cease to operate the
Background/Foreground Music Service referred to in this agreement and if
LICENSEE shall have discharged all the obligations of LICENSEE to SOCIETY under
this agreement, then LICENSEE may terminate the license granted by this
agreement upon thirty days prior written notice to SOCIETY, but no such
termination shall relieve LICENSEE of any obligations hereunder as to
performances rendered, acts done and obligations incurred prior to the effective
date of such termination.
IN WITNESS WHEREOF this agreement has been duly executed by SOCIETY and
LICENSEE, this day of , 19 .
AMERICAN SOCIETY OF COMPOSERS,
AUTHORS AND PUBLISHERS __________________________________
LICENSEE
By ______________________________ By _______________________________
_______________________________
Title
<PAGE>
Exhibit 10.13
<PAGE>
JOINT VENTURE AGREEMENT
among
ALCAS HOLDING B.V.
and
MUZAK LIMITED PARTNERSHIP
August 2, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. ORGANIZATION, NAME AND
CAPITALIZATION OF THE COMPANY.............. - 1 -
-----------------------------
1.1 Incorporation.................................. - 1 -
-------------
1.2 Proprietary Marks.............................. - 2 -
-----------------
1.3 Initial Capital................................ - 2 -
---------------
1.4 Subscription of Company Shares................. - 2 -
------------------------------
1.5 Additional Equity.............................. - 2 -
-----------------
1.6 Initial Indebtedness........................... - 3 -
--------------------
1.7 Additional Indebtedness........................ - 3 -
-----------------------
II. BUSINESS OF THE COMPANY.............................. - 3 -
-----------------------
2.1 Purpose........................................ - 3 -
-------
2.2 Distributors................................... - 4 -
------------
2.3 ALCAS as Distributor........................... - 4 -
--------------------
2.4 License of Intangibles and Provision of
---------------------------------------
Services....................................... - 4 -
--------
III. DIRECTORS, MANAGEMENT, SHAREHOLDERS, AUDITS......... - 5 -
-------------------------------------------
3.1 Board of Managing Directors.................... - 5 -
---------------------------
3.2 Proxy Holders........................................ - 5 -
-------------
3.3 Fundamental Issues............................. - 5 -
------------------
3.4 Deadlock....................................... - 6 -
--------
3.5 Shareholder Actions............................ - 8 -
-------------------
3.6 Financial Statements, Auditors and Fiscal
-----------------------------------------
Year........................................... - 8 -
----
IV. RESTRICTIONS ON DISPOSITION OF STOCK................. - 8 -
------------------------------------
4.1 Restrictions................................... - 8 -
------------
4.2 Voluntary Disposition of Shares................ - 8 -
-------------------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
V. RIGHT TO ACQUIRE SHARES............................... - 10 -
-----------------------
5.1 Triggering Event............................... - 10 -
----------------
5.2 Right of Election.............................. - 10 -
-----------------
5.3 Cumulative Rights.............................. - 11 -
-----------------
5.4 Automatic Dissolution.......................... - 11 -
---------------------
5.5 Dissolution by Mutual Consent.................. - 11 -
-----------------------------
VI. CONFIDENTIALITY...................................... - 11 -
---------------
VII. NON-COMPETITION..................................... - 12 -
---------------
VIII. MUZAK'S PROPRIETARY MARKS.......................... - 12 -
-------------------------
8.1 Ownership...................................... - 12 -
---------
8.2 Infringement................................... - 13 -
------------
8.3 Use............................................ - 13 -
---
8.4 Substitution of Proprietary Marks.............. - 14 -
---------------------------------
IX. MISCELLANEOUS PROVISIONS............................. - 14 -
------------------------
9.1 Nonwaiver of Rights............................ - 14 -
-------------------
9.2 Terms of Agreement............................. - 14 -
------------------
9.3 Assignment..................................... - 15 -
----------
9.4 Integration.................................... - 15 -
-----------
9.5 Severability................................... - 15 -
------------
9.6 Notices........................................ - 16 -
-------
9.7 Necessary Measures and Good Faith; No Agency... - 16 -
--------------------------------------------
9.8 Governing Law.................................. - 17 -
-------------
9.9 Closing........................................ - 17 -
-------
9.10 Captions....................................... - 17 -
--------
9.11 Counterpart Originals.......................... - 17 -
---------------------
</TABLE>
ii
<PAGE>
EXHIBITS
EXHIBIT A - Articles of Incorporation of the Company
EXHIBIT B - MUZAK's Proprietary Marks
EXHIBIT C - Distributor Agreement
EXHIBIT D - Software and Programming Provided by MUZAK and Services Provided
by ALCAS
iii
<PAGE>
THIS AGREEMENT is entered into this second day of August, 1995 by and among
ALCAS HOLDING B.V., a Netherlands corporation, having its principal business
office at Naarden ("ALCAS") and MUZAK LIMITED PARTNERSHIP, a Delaware, U.S.A.
limited partnership, having its principal business office at 2901 Third Avenue,
Suite 400, Seattle, Washington 98121 ("MUZAK").
WITNESSETH
----------
WHEREAS, ALCAS and MUZAK desire to establish on the terms and conditions
hereinafter set forth a Netherlands corporation to engage in the production and
distribution of music, advertising, data, visual merchandising and business
television throughout Europe;
WHEREAS, the primary contribution of ALCAS to the corporation shall be to
provide access to its distribution network as a distributor for the corporation
as well as programming and marketing support, and the primary contribution of
MUZAK to the corporation shall be its knowledge and experience in satellite
delivery of services, its technical know-how, and programming;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
I. ORGANIZATION, NAME AND
CAPITALIZATION OF THE COMPANY
-----------------------------
1.1 Incorporation. In connection with the execution of this Agreement,
-------------
the parties shall cause the organization under the laws of the Netherlands of a
new corporation named "MUZAK EUROPE B.V." (the "Company"). The Articles of
Association of said new corporation shall be substantially in the form of
Exhibit A attached hereto and made a part hereof. The Company will have its
principal office in Hilversum, Netherlands. The parties hereby agree to take
such steps and to execute such documents as may be necessary to qualify the
Company to do business in the Netherlands, and elsewhere throughout Europe as
1
<PAGE>
required.
1.2 Proprietary Marks. Subject to the terms and conditions herein
-----------------
contained, MUZAK hereby grants to the Company an exclusive, nontransferable
license to use and to sublicense distributors to use the Proprietary Marks now
or hereafter set forth on Exhibit B on or in connection with the distribution of
music, advertising, data, visual merchandising and business television
throughout Europe. The Company is granted no other license hereby, and
specifically is granted no license, right or permission to use the Proprietary
Marks except in connection with the business to be operated under this Joint
Venture Agreement. ALCAS shall not have any right to use the Proprietary Marks.
The foregoing license shall terminate upon the dissolution of the Company and/or
upon the sale by MUZAK of all of its shares of the Company's stock; provided,
however, that the Company shall be entitled to a sixty day transition period
following a dissolution or sale by Muzak in order to change its name and remove
the Proprietary Marks from its equipment, supplies and marketing materials in an
orderly fashion.
1.3 Initial Capital. The initial authorized capital of the Company shall
---------------
be 4.000.000 Netherlands guilders, divided into 4.000.000 shares of one (1)
Netherlands guilder nominal value each, of which authorized capital 970.000
shares shall be issued and paid up in cash at the incorporation of the Company.
1.4 Subscription of Company Shares. It is agreed that ALCAS shall
------------------------------
subscribe to 485.000 shares against payment of 485.000 Netherlands guilders and
MUZAK shall subscribe to 485.000 shares against payment of 485.000 Netherlands
guilders.
1.5 Additional Equity. It is contemplated by the parties that additional
-----------------
capital requirements of the Company shall be met, to the extent possible, by
borrowing. However, upon a determination by the Board of Managing Directors of
the Company that additional shareholders' equity is necessary, the parties, as
shareholders of the Company, shall take such steps as may be deemed necessary or
appropriate by the Board of Managing Directors to increase their respective
equity investments in the Company by issuance of additional shares of capital
stock,
2
<PAGE>
contributions to capital or otherwise. All such increases in equity investment
by the parties shall be pro rata to each shareholding, and the requirement that
each party make any additional investment shall be conditional upon (a) the
making of a pro rata additional investment by the other party; and (b) the
absence of a material breach by the other party of any provision of this
Agreement. In no event shall MUZAK or ALCAS be required to invest additional
amounts in excess of 275.000 Netherlands guilders.
1.6 Initial Indebtedness. It is contemplated by the parties that ABN
--------------------
AMRO, a Netherlands bank, shall lend the Company 800.000 Netherlands guilders as
part of the initial capitalization of the Company. The parties shall take all
steps as are necessary to cause such indebtedness to be incurred by the Company
on the terms and conditions as the parties may deem appropriate.
1.7 Additional Indebtedness. In the event that the Board of Managing
-----------------------
Directors of the Company determines that it is necessary or desirable for the
Company to raise funds by incurring additional indebtedness, the parties shall
take such steps as are necessary to cause such indebtedness to be authorized
and incurred by the Company on such terms and conditions as the Board of
Managing Directors may deem appropriate. In no event shall the Company incur
additional indebtedness in excess of 550.000 Netherlands guilders.
II. BUSINESS OF THE COMPANY
-----------------------
2.1 Purpose. The purpose of the Company shall be to provide distribution
-------
of music, advertising, data, visual merchandising and business television
(collectively, the "Services") throughout Europe and activities incident thereto
and to engage in such other related activities as the General Meeting of
Shareholders of the Company by amending the Articles of Association of the
Company shall determine are in the best interest of the Company.
The intention of this Agreement is for both parties to provide all Services
through the Company. Satellite provided services
3
<PAGE>
shall exclusively by both parties be provided through the Company. However, each
party may provide Services (other than satellite provided Services) to
distributors (other than distributors who have entered into distributor
agreements with the Company) in Europe. To the extent a party provides Services
to a distributor who has entered into a distributor agreement with the Company,
such party shall provide such Services for the relevant territory on an
exclusive basis through the Company.
2.2 Distributors. The Company shall appoint and maintain a network of
------------
distributors throughout Europe (each a "Distributor" and collectively
"Distributors") to market and distribute a music, advertising, data, visual
merchandising and business television services (the "Services") within a
prescribed territory (the "Territory") to customers who enter into agreements
providing for receipt of the Services at certain commercial locations
("Subscriber Premises"), such Distributor Agreement substantially in the form of
Exhibit C attached hereto.
2.3 ALCAS as Distributor. Following execution of this Agreement, the
--------------------
Company shall appoint and enter into a Distributor Agreement with one or more
controlled subsidiaries of ALCAS, and such subsidiaries shall agree to act, as
exclusive distributors of the Services to subscribers located within the
Benelux.
2.4 License of Intangibles and Provision of Services. The parties
------------------------------------------------
acknowledge that MUZAK must charge a reasonable arms-length license fee for the
software and programming it provides to the Company. Accordingly, MUZAK hereby
grants an exclusive perpetual license for Europe in the software described on
Exhibit D to the Company for a one-time license fee of U.S. $25,000, and in
addition hereby grants an exclusive, five year, renewable license for Europe in
the music programming described on Exhibit D to the Company for a license fee of
U.S. $25,000, and shall license the Proprietary Marks on the terms set forth
herein for a one-time license fee of U.S. $5.000. ALCAS shall provide the
Services described on Exhibit C to the
4
<PAGE>
Company for a fee of U.S. $55,000. The fees described in this Section 2.4 shall
be payable upon incorporation.
III. DIRECTORS, MANAGEMENT, SHAREHOLDERS, AUDITS
-------------------------------------------
3.1 Board of Managing Directors. The Board of Managing Directors of the
---------------------------
Company shall consist of the two shareholders (ALCAS and MUZAK). All decisions
by the Board of Managing Directors shall require the unanimous vote of ALCAS and
MUZAK. The Company may only be represented by all Managing Directors acting
jointly.
3.2 Proxy Holders. There shall be one Proxy Holder of the Company, who
-------------
shall run the day-to-day operations of the Company in close cooperation with the
Board of Managing Directors. The Proxy Holder shall need the approval of the
Board of Managing Directors for all Fundamental Issues.
3.3 Fundamental Issues. Fundamental Issues as to be decided upon from
------------------
time to time by the Board of Managing Directors shall include, without
limitation, the following:
(1) Any change of and/or amendment of the Financial Plan as
amended from time to time by the General Meeting of
Shareholders;
(2) Acquisition, alienation or encumbrance of real property or
any contracts with respect thereto;
(3) Entering into contracts or voluntary termination of any
contracts having a total yearly cost to the Company
exceeding NLG 100.000;
(4) Granting of general or broad powers of attorney and proxies,
except to legal counsel where prompt action is required;
(5) Borrowing or lending;
(6) Granting or assumption of financial guarantees, warranty or
surety obligations;
(7) Acquisition, alienation, encumbrance or waiver of patent or
trademark rights;
(8) Opening, closing, reconstruction or reequipment of any
operational facilities or
5
<PAGE>
branch offices in excess of NLG 100.000;
(9) Acquisition or alienation of participations in other
enterprises or increases or decreases thereof;
(10) Establishment or termination of participation in contracts
involving any kind of profit or loss sharing;
(11) Any other matters which the Board of Managing Directors or
the shareholders unanimously determine should be reserved
for its approval;
(12) Commencement of legal proceedings (including litigation and
arbitration) by the Company and settlement of claims brought
by or against the Company;
(13) Entering into contracts or voluntary termination of
contracts or amending contracts between the Company and its
distributors.
3.4 Deadlock.
--------
(a) Buyout. In the event of a deadlock, i.e., a 75% majority on any
------
Fundamental Issue cannot be obtained, the Board of Managing Directors shall
attempt to resolve such deadlock on a mutually satisfactory basis within thirty
(30) days. Failing this, the parties hereto agree to try in good faith to
resolve the deadlock within thirty (30) days by mediation following the rules of
the Netherlands Mediation Institute. If the deadlock is not resolved through
mediation within such second thirty (30) days, then MUZAK shall within thirty
(30) days appoint an Investment Bank of good standing which will calculate a
price per share for the Company being entitled to use the Proprietary Marks (the
"MUZAK Price") and a price per share for the Company not being entitled to use
the Proprietary Marks (the "Non-MUZAK Price"). After the Investment Bank
designated by MUZAK has calculated both prices MUZAK will offer to either (1)
buy from ALCAS all of its shares in the Company for the price per share which
equals the MUZAK Price as determined by the Investment Bank designated; or (2)
sell to ALCAS all of its shares in the
6
<PAGE>
Company for the price per share which equals the Non-MUZAK Price as determined
by the Investment Bank designated. If MUZAK's offer to buy is accepted by ALCAS
within thirty (30) days of the making of the offer by MUZAK, ALCAS shall be
obligated to transfer all of its shares in the Company to MUZAK upon tender of
the offer price by MUZAK within thirty (30) days after such acceptance. If
MUZAK's offer to sell is accepted by ALCAS within thirty (30) days of the making
of the offer by MUZAK, MUZAK shall be obligated to transfer all of its shares in
the Company to ALCAS upon tender of the offer price by ALCAS within thirty (30)
days after such acceptance. If ALCAS does not accept MUZAK's offer to sell or to
buy ALCAS shall nominate within thirty (30) days of the making of the offer by
MUZAK an Investment Bank of good standing which in turn will calculate the MUZAK
Price and the Non-MUZAK Price within thirty (30) days. After this subsequent
calculation of the MUZAK Price and the Non-MUZAK Price, MUZAK shall be obligated
at its discretion (1) either to transfer all of its shares in the Company to
ALCAS for the average of the Non-MUZAK Price as calculated by the Investment
Bank designated by MUZAK and the Non-MUZAK Price as calculated by the Investment
Bank designated by ALCAS (2) or purchase all of the shares ALCAS holds in the
Company for the average of the MUZAK Price as calculated by both Investment
Banks.
(b) Dissolution. In the event that either party fails to nominate an
-----------
Investment Bank in accordance with Section 3.4(a) above, the other party shall,
at its option, either (i) purchase all of the shares of the Company then owned
by the party failing to nominate an Investment Bank in accordance with Section
3.4(a) for the book value of such shares, exclusive goodwill, to be determined
by an Investment Bank designated by the other party, or (ii) cause the Company
to be dissolved, in which case the parties agree to vote their shares in the
Company for such dissolution and shall cause the Directors representing their
respective Shares to dissolve in accordance with applicable law.
7
<PAGE>
3.5 Shareholder Actions. Shareholders of the Company shall meet at least
-------------------
once a year at the General Meeting of Shareholders. For all decisions a vote
(or written consent) of at least seventy-five percent (75%) of all shares is
requested. The General Meeting of Shareholders shall decide on the annual budget
of the Company (the Financial Plan), adopt the annual accounts, and declare
dividends.
3.6 Financial Statements, Auditors and Fiscal Year. The parties shall
----------------------------------------------
cause the Company to deliver annually to each party hereto financial statements
prepared by a "big six" independent accounting firm mutually agreed upon by the
parties and prepared in accordance with generally accepted accounting principles
consistently applied, and such other financial data and at such intervals as the
Board of Supervisory Directors of the Company shall from time to time determine.
The fiscal year of the Company shall coincide with the calendar year.
IV. RESTRICTIONS ON DISPOSITION OF STOCK
------------------------------------
4.1 Restrictions. No party may, without the prior written consent of the
------------
other party, usufruct, pledge or mortgage any of its shares in the Company
except that any party may pledge its shares as security to a lender requiring
such pledge as a condition of financing of its business operations. No party
may without the prior written consent of the other party, during five (5) years
as from the signing of this Agreement sell, transfer or assign its shares in the
Company. After this five (5) years period Section 4.2 below shall constitute
the only mechanism to sell, transfer or assign shares in the Company.
Notwithstanding anything to the contrary contained in the preceding sentences or
in Section 4.2 below, an assignee, usufructuary, pledgee or mortgagee of any
shares in the Company shall other than in case of default under the lending
facilities not be entitled to exercise any voting rights associated with any
shares without the prior written consent of the non-transferring shareholders.
4.2 Voluntary Disposition of Shares. In the event that after five (5)
-------------------------------
years as from the signing of this Agreement any of the parties wishes to sell
any of its shares in the Company
8
<PAGE>
(the "Offeror") it must first offer such shares to the other party (the
"Offeree"), under the following terms and procedure:
(i) The Offeror shall notify the Offerees in writing that the Offeror
wishes to sell all (but not less than all) of its shares in the
Company and the price to be determined in accordance with the
mechanism described in Section 3.4 (a) at which it proposes to
sell such shares, whereupon the Offeree shall have the right and
option for a period of forty-five days following receipt of such
notification, to elect to purchase all of such shares at the same
price. The Offeree electing to exercise such right and option,
shall deliver written notice of its election to do so to the
Offeror within said period of forty-five days. Upon receipt of
such notice of election, the Offeror shall forthwith assign and
transfer the shares to the Offeree(s) against payment of the
purchase price.
(ii) If the Offeree shall fail to exercise its right and option in
accordance with the foregoing provisions, following said period
of forty-five days, then the Offeror shall have the right for an
additional thirty days immediately following said period, to sell
all (but not less than all) of such shares to a third-party
transferee, provided in addition that (a) the price of such sale
shall be not less than the average of the Non-MUZAK Price as
calculated by the Investment Bank designated by MUZAK and the
Non-MUZAK Price as calculated by the Investment Bank designated
by ALCAS as described in Section 3.4 (a) in the event that MUZAK
would be the Offeror or the average of the MUZAK Price as
calculated by the Investment Bank designated by MUZAK and the
Non-MUZAK Price as calculated by the Investment Bank designated
by ALCAS as described in Section event that MUZAK would be the
Offeror or the average of the MUZAK Price as calculated by the
Investment Bank designated by MUZAK and the MUZAK Price as
calculated by the Investment Bank designated by ALCAS as
described in Section
9
<PAGE>
3.4(a) in the event that ALCAS would be the Offeror and the terms
and conditions of such sale shall not be more favorable than
those offered to the Offeree; and (b) the third-party transferee
has the ability to be (in the reasonable judgment of the non-
transferring party), and agrees to be, bound by the terms hereof.
If such sale shall not be made within such additional period of
thirty days, all restrictions of this Section shall continue to
be applicable to any subsequent sale.
V. RIGHT TO ACQUIRE SHARES
-----------------------
5.1 Triggering Event. In the event that a party is in breach of any of
----------------
the provisions of this Agreement in any material respect, and such breach
continues for a period of thirty (30) days after ALCAS or MUZAK, as the case may
be, has given notice in writing to such party demanding cure thereof (a
"Triggering Event"), MUZAK and/or ALCAS, as the case may be, shall have the
rights described in Section 5.2.
5.2 Right of Election. It is the intention of the parties that upon the
-----------------
occurrence of a Triggering Event, operations of the Company shall continue
uninterrupted to the extent desirable. In the event of a Triggering Event, the
parties agree to try in good faith to resolve the matter within thirty (30) days
by mediation following the rules of the Netherlands Mediation Institute. If the
matter is not resolved within such thirty (30) day period, whichever of ALCAS
and/or MUZAK is not causing the Triggering Event (the "Non-triggering
Party(ies)"), shall have the right to elect to purchase all the shares of the
Company held by the party causing the Triggering Event at the lesser of (i) book
value, exclusive of good will, of such shares; or (ii) fair market value of such
shares. Such right shall be exercisable by written notice from the Non-
triggering Party(ies) to the party subject to the Triggering Event within thirty
(30) days after receipt by the Non-triggering Party(ies) of actual notice of the
existence of the Triggering Event which gives rise to its right to purchase
hereunder.
10
<PAGE>
For purposes of the sale of shares pursuant to this Section 5.2, the fair
market value of such shares shall be determined by an investment banker to be
agreed upon by ALCAS and MUZAK. In the event the parties fail to agree upon
such investment banker within ten (10) days after receipt of notice by the Non-
triggering Party(ies), MUZAK and ALCAS shall, within 10 days after such ten (10)
day period, each select an investment banker (the "Investment Bankers"),
provided that neither Lazard Freres and Co., Inc., a New York investment bank,
nor De Nationale Investeringsbank N.V. may be selected as an Investment Banker.
Each Investment Banker shall make a determination of the fair market value of
such shares (the "Determination") within fifteen (15) days thereafter. In the
event that the Investment Bankers arrive at different Determinations, the fair
market value of the shares shall be the average of the two Determinations. The
cost of such fair market valuation shall be borne pro rata by ALCAS and MUZAK,
according to their respective capital shareholdings at the time of the
valuation.
5.3 Cumulative Rights. The right of election provided for by Section 5.2
-----------------
above shall be non-exclusive, cumulative, and in addition to any other right or
remedy provided herein or now or hereafter existing at law or in equity, and may
be exercised concurrently, independently or successively with such other rights
and remedies.
5.4 Automatic Dissolution. The Company shall dissolve upon the bankruptcy
---------------------
of any shareholder, unless the Company is continued by the consent of the
remaining shareholders within 90 days after such bankruptcy, resignation or
expulsion.
5.5 Dissolution by Mutual Consent. The Company shall dissolve upon the
-----------------------------
unanimous written agreement of all shareholders to dissolve the Company.
VI. CONFIDENTIALITY
---------------
All information disclosed to any party to this Agreement during the
negotiations for, and term of, this Agreement, including, but not limited to,
concepts, trade secrets, technology, research, products, derivatives and
components of products, samples, and business methods used, belonging to, or
11
<PAGE>
designed or developed by or for any party, shall be referred to in this
Agreement as the "Proprietary Information." Each party, as well as the Company,
shall retain the Proprietary Information in confidence during the term of this
Agreement and for three (3) years thereafter, and shall not reproduce, use,
disseminate, display, publish or disclose the Proprietary Information to any
third party without the prior written approval of the party providing the
Proprietary Information or, in the case of the Company's Proprietary
Information, the Company, except that each party shall be entitled to disclose
the Proprietary Information it knew and/or possessed prior to the negotiations
for and execution of this Agreement. Notwithstanding the above each party may
use the Proprietary Information for its own use during the period of twelve
months following the termination of this Agreement for purposes of carrying out
business matters covered by this Agreement.
VII. NON-COMPETITION
---------------
Each party agrees that so long as it owns any shares in the Company, it
will not, and it will ensure that its affiliates will not, directly or
indirectly engage in, or assist or participate with any third party for the
purpose of engaging in the business of providing distribution of music,
advertising, data, visual merchandising, and business television in competition
with the Company; provided, however, that each party may continue to operate and
develop its tape- and compact disc-based music service business as such business
is presently being operated or will be developed in Europe in conformity with
Section 2.1.
VIII. MUZAK'S PROPRIETARY MARKS
-------------------------
8.1 Ownership. MUZAK represents that it is the owner of all right, title,
---------
and interest in and to the Proprietary Marks. MUZAK will take all steps
reasonably necessary to preserve and protect the ownership and validity in and
of the Proprietary Marks. No party to this Agreement shall directly or
indirectly contest the validity or MUZAK's ownership of the Proprietary Marks,
or take any action which it might reasonably have foreseen would impair the
validity or enforceability of the
12
<PAGE>
Proprietary Marks. In the event that litigation involving the Proprietary Marks
is instituted or threatened against the Company, the Company shall promptly
notify MUZAK and shall cooperate fully in the defense or settlement of such
litigation, which MUZAK shall have the right to control. Each party to this
Agreement expressly understands and acknowledges that MUZAK is the owner of all
right, title, and interest in and to the Proprietary Marks and the goodwill
associated with and symbolized by them. The Company's use of the Proprietary
Marks pursuant to this Agreement does not give the Company any ownership
interest or other interest in or to the Proprietary Marks, except the license
granted by this Agreement.
8.2 Infringement. The Company shall promptly notify MUZAK of any
------------
suspected infringement of the Proprietary Marks, and of any challenge to MUZAK's
ownership of, or the Company's right to use the Proprietary Marks. MUZAK shall
have the sole right to decide whether an administrative or judicial proceeding,
or other action, should be undertaken in response to any such suspected
infringement or challenge, and, if any such proceeding or action is to be
undertaken, to initiate and control such proceeding or action. In the event
MUZAK elects to undertake any such proceeding, or action, the Company agrees to
cooperate with MUZAK in such effort and agrees to execute any and all documents
and to do such acts and things as may be necessary to carry out such proceeding
or action, including, but not limited to, becoming a nominal party to any legal
action. The Company shall have no right to institute any litigation against a
third party relating to the Proprietary Marks without MUZAK's prior written
consent. Legal costs in connection with the protection of MUZAK's Proprietary
Marks are for the account of MUZAK.
8.3 Use. The Company's right to use the Proprietary Marks is limited to
---
such uses as are authorized under this Agreement and any unauthorized use
thereof shall constitute an infringement of MUZAK's rights. Unless otherwise
authorized or required by MUZAK, the Company shall not use the Proprietary Marks
with any prefix, suffix or in combination with other
13
<PAGE>
words or designs and shall comply with MUZAK's instructions in filing and
maintaining the requisite registered user and trade name or fictitious name
registrations, and shall execute any documents reasonably deemed necessary by
MUZAK or its counsel to obtain protection for the Proprietary Marks or to
maintain their continued validity and enforceability. Unless otherwise
authorized or required by MUZAK, the Company shall use the Proprietary Marks
without prefix or suffix and shall comply with MUZAK's instructions regarding
(i) the use of the U.S. federal registration symbol and other trademark or
service mark designations, (ii) the identification of MUZAK as the owner and the
Company as the user of the Proprietary Marks, and (iii) the identification of
the Company as the independent owner and operator of its business. The Company
shall not use the Proprietary Marks to incur any obligation or indebtedness on
behalf of MUZAK.
8.4 Substitution of Proprietary Marks. MUZAK reserves the right to add
---------------------------------
Proprietary Marks and to substitute different Proprietary Marks, or discontinue
the use of Proprietary Marks (other than the Proprietary Mark MUZAK(R)) if
MUZAK's currently owned Proprietary Marks no longer can be used, or if MUZAK
determines that such addition, substitution, or discontinuation will be
beneficial to its business. All such additions, substitutions or
discontinuations will be reflected in an amendment of Exhibit B and shall not
affect the validity of this Agreement, which shall, in all respects, be deemed
modified to provide for such addition, substitution or discontinuation.
IX. MISCELLANEOUS PROVISIONS
------------------------
9.1 Nonwaiver of Rights. No failure or delay on the part of either party
-------------------
in the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
9.2 Terms of Agreement. This Agreement shall continue in full force and
------------------
effect until the earlier of (i) termination by
14
<PAGE>
mutual consent or (ii) dissolution of the Company.
9.3 Assignment. Neither this Agreement nor any rights or obligations
----------
hereunder are assignable in whole or in part by any party without the prior
written consent of the other party, except that it may be assigned in connection
with and to the extent of a voluntary transfer of the shares by any of the
parties to a transferee shareholder which obtains such shares in accordance with
the terms of this Agreement; provided that there shall be no assignment of this
Agreement without a simultaneous assignment of shares in the Company held by the
assigning party, and there shall be no assignment of such shares without a
simultaneous assignment of all of the rights and obligations of the Transferor
hereunder.
9.4 Integration. This Agreement sets forth the entire understanding
-----------
between the parties relating to the subject matter contained herein and merges
all prior discussions between the parties. No amendment to this Agreement shall
be effective unless in writing and executed by the parties hereto. The Articles
of Association of the Company shall not be considered to be an amendment to this
Agreement. In case of any conflicting provisions in this Agreement and in the
Articles of Association of the Company, the provisions of this Agreement shall
prevail.
9.5 Severability. If any of the provisions of this Agreement are held
------------
invalid or unenforceable and unless the invalidity or unenforceability thereof
does substantial violence to the underlying intent and sense of the remainder of
this Agreement, such invalidity or unenforceability shall not affect in any way
the validity or enforceability of any other provisions of this Agreement except
those of which the invalidated or unenforceable provisions comprise an integral
part of or are otherwise clearly inseparable from. In the event any provision
is held invalid or unenforceable, the parties shall use their best efforts to
agree upon a valid and enforceable provision which shall be a reasonable
substitute for such invalid or unenforceable provision in light of the tenor of
this Agreement and, upon so agreeing, shall incorporate such substitute
15
<PAGE>
provision in this Agreement.
9.6 Notices. Any notice under this Agreement shall be effective as of the
-------
date of receipt thereof and shall be deemed to have been sufficiently given if
sent by personal delivery, registered or certified mail, postage prepaid, or
telecopy, addressed as follows:
If to ALCAS:
ALCAS HOLDING B.V.
Rubberstraat 9
1411 LL NAARDEN
Tel.: 02159-48591
Telecopy: 02159-48500
Attn.: Managing Director
If to MUZAK:
MUZAK LIMITED PARTNERSHIP
2901 Third Avenue, Suite 400
Seattle, WA 98121
Telecopy: 206-633-6210
Attention: President
In the event that any notice pursuant hereto is sent by telecopy, said notice
shall be promptly confirmed by registered or certified mail, postage prepaid.
9.7 Necessary Measures and Good Faith; No Agency. The parties shall in a
--------------------------------------------
timely manner take all measures which are necessary or appropriate to cause the
Company and its Board of Managing Directors to implement the provisions of this
Agreement and the transactions contemplated hereby, and the parties shall at all
times act in good faith with respect to the obligations incurred by them
hereunder. No party shall be the agent, partner or legal representative of
another, either
16
<PAGE>
express or implied, nor shall any party have the right or power to enter into
any contractual obligation whatsoever on behalf of the other.
9.8 Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the Netherlands without giving effect to the
principles of conflict of laws thereof. The parties shall use best efforts to
solve any dispute amongst them in good faith and in an amicable way within
thirty (30) days. Failing this, the parties agreed to resolve the dispute
within thirty (30) days by mediation following the rules of the Netherlands
Mediation Institute. If the dispute is not resolved through mediation within
such second thirty (30) days, the dispute shall be submitted to the competent
courts in Amsterdam.
9.9 Closing. The closing of the transaction as provided for herein
-------
("Closing") shall take place at the offices of ______________________________,
at such time and place as parties may mutually agree.
9.10 Captions. The captions used at the commencement of various articles,
--------
sections and subsections of this Agreement are for purposes of ease of reference
only, and in no event or respect shall the substance of any provision or the
intent of the parties be interpreted or controlled by any such captions.
9.11 Counterpart Originals. This Agreement may be executed simultaneously
---------------------
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ALCAS HOLDING B.V.
By
/s/ Eric van der Horst
----------------------------------
Name: Eric van der Horst
__________________________
Title: Managing Director
MUZAK LIMITED PARTNERSHIP
By
/s/ John Jester
----------------------------------
Name: John Jester
__________________________
Title: President
__________________________
18
<PAGE>
Exhibit 10.14
<PAGE>
[LETTERHEAD OF MUZAK APPEARS HERE]
February 21, 1992
Arturo Zorilla Martinez
AUDIOPLAN, S.A.
Ave. Periferico Sur #3449
1er Piso
San Jeronimo Lidice
Mexico 20, D.F. Mexico
Dear Arturo:
Enclosed are duplicate originals of the Master Affiliate Agreement between
Audioplan, S.A. and Muzak Limited Partnership.
As you know, the Mexican government has not yet adopted the franchising
regulations that are referred to in the "Law on the Promotion and Protection of
Industrial Property (LPI)" that was enacted in June 1991. These regulations are
anticipated to require that certain disclosure information about a franchisor be
provided to a prospective franchisee in Mexico.
You have indicated that you wish to proceed as soon as possible with our new
license arrangement, and we are willing to do that on the following conditions:
1. At such time as the new regulations are promulgated, this Master
Affiliate Agreement will be terminated. It will be replaced by a newly signed
Master Affiliate Agreement (which will contain the same terms as are in the
existing Agreement), after Muzak has complied with the disclosure requirements
in the new regulations.
2. You (on behalf of Audioplan and yourself, and your respective
successors and assigns) waive all rights to object to any failure of Muzak to
comply with applicable requirements of Mexican law in connection with the
execution of and operation under the enclosed Agreement, and agree to indemnify
and hold Muzak harmless from and against any liabilities, damages, claims or
penalties arising from any such failure of Muzak to comply with applicable
requirements of Mexican law.
If you agree to these conditions, please countersign the enclosed copy of this
letter and return it to me, with one copy of the
<PAGE>
Arturo Zorilla Martinez
February 21, 1992
Page 2
Agreement. If you do not agree to these conditions, please do not sign the
Agreement.
Our willingness to enter into the interim arrangement you have requested is
based on our long-standing relationship with you and Audioplan, S.A. We are
assuming that, based on your many years of operation as a Muzak franchisee, you
are familiar with our business and our personnel. Nonetheless, we are enclosing
with the originals of this Agreement a copy of the Uniform Franchise Offering
Circular that is distributed to prospective Muzak franchisees in the United
States. (You will note that the agreement that is described in that offering
circular differs from that which is being offered to you in several regards due
to the "Master Affiliate" arrangement that is contained in your Agreement.) If
you have any other questions about Muzak or the terms of your Agreement,
however, please be sure to have them answered before you sign the Master
Affiliate Agreement.
Sincerely,
/s/ John R. Jester
John R. Jester
President
The undersigned, for themselves and on behalf of their respective successors and
assigns, hereby agree to the foregoing, and waive all rights or claims they may
now or hereafter have arising from any failure of Muzak to comply with
applicable requirements of Mexican law with respect to the execution of and
operation under the Master Affiliate Agreement referred to above, and agree to
indemnify and hold Muzak harmless from and against any liabilities, damages,
claims or penalties arising from any such failure of Muzak.
AUDIOPLAN, S.A.
By: [SIGNATURE ILLEGIBLE] Attest: [SIGNATURE ILLEGIBLE]
-------------------------- ----------------------------
Title: PRESIDENT
-----------------------
[SIGNATURE ILLEGIBLE]
- ------------------------------ Attest: [SIGNATURE ILLEGIBLE]
Arturo Zorilla Martinez ----------------------------
cc: Jack Carroll, Esq.
<PAGE>
MUZAK(R) MASTER AFFILIATE AGREEMENT
(MEXICO)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
RECITALS............................................................... 1
1. GRANT............................................................. 2
1.1 Rights Granted.............................................. 2
1.2 Limitations on Muzak........................................ 4
1.3 Rights Retained............................................. 5
1.4 Existing Affiliate Territories.............................. 6
2. TERM AND RENEWAL.................................................. 6
3. DUTIES OF MUZAK................................................... 7
3.1 Services.................................................... 7
3.2 DBS Delivery................................................ 7
3.3 Recorded Media.............................................. 9
3.4 Adjunct Services............................................ 10
3.5 DBS......................................................... 10
3.6 Mechanical and Performance Rights........................... 11
4. FEES.............................................................. 12
4.1 Royalty Fees................................................ 12
4.2 Adjunct Services Charges.................................... 13
4.3 Recorded Media Charges...................................... 13
4.4 Payments.................................................... 13
5. DUTIES OF MASTER AFFILIATE........................................ 15
5.1 Development of Mexican Market and Use of Muzak
Name........................................................ 15
5.2 Service Delivery Equipment; Permits and Approvals........... 16
5.3 Modification Prohibited..................................... 18
5.4 Unauthorized Reception or Duplication....................... 19
5.5 Execution of Affiliate Agreements........................... 20
5.6 Enforcement of Affiliate Agreements......................... 21
5.7 Staff....................................................... 21
5.8 Sales Growth................................................ 21
5.9 Performing Rights Agreements................................ 22
5.10 Central Warehouse........................................... 22
5.11 Training Programs........................................... 22
6. PROPRIETARY MARKS................................................. 23
6.1 Muzak Representations....................................... 23
6.2 Validity and Infringement................................... 23
6.3 Authorized Use.............................................. 25
6.4 Execution of Documents...................................... 26
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
6.5 Ownership of Goodwill....................................... 27
6.6 Substitution of Proprietary Marks........................... 27
7. NATIONAL ACCOUNTS PROGRAM; CABLE RADIO/TELEVISION................. 28
7.1 National Accounts Program................................... 28
7.2 Cable Radio/Television...................................... 29
8. MARKETING AND PROMOTION........................................... 29
8.1 Submission of Samples....................................... 29
8.2 Promotional Materials....................................... 30
9. ACCOUNTING AND RECORDS............................................ 30
9.1 Maintain Records; Inspection................................ 30
9.2 Monthly Reports............................................. 32
9.3 Right to Audit.............................................. 32
9.4 Assessments................................................. 32
10. INSURANCE......................................................... 33
11. TRANSFER OF INTEREST.............................................. 34
11.1 Assignment by Muzak......................................... 34
11.2 Change of Stock Ownership................................... 34
11.3 Assignment by Master Affiliate; Right of First
Refusal..................................................... 35
12. DEFAULT AND TERMINATION........................................... 36
12.1 Automatic................................................... 36
12.2 Non-Curable................................................. 37
12.3 Curable..................................................... 38
12.4 Force Majeure............................................... 39
13. OBLIGATIONS UPON TERMINATION OR EXPIRATION........................ 39
14. COVENANTS......................................................... 42
14.1 No Other Services........................................... 42
14.2 Confidentiality............................................. 44
14.3 Covenants Independent....................................... 46
14.4 Irreparable Injury.......................................... 46
15. FEES, TAXES AND PERMITS........................................... 46
15.1 Taxes....................................................... 46
15.2 Comply with Laws............................................ 47
15.3 Notice of Suit.............................................. 47
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
16. INDEPENDENT CONTRACTOR AND INDEMNIFICATION........................ 47
16.1 No Fiduciary Relationship................................... 47
16.2 Representations By the Parties.............................. 47
16.3 Independent Contractor...................................... 48
17. APPROVALS AND WAIVERS............................................. 48
17.1 Request for Approval........................................ 48
17.2 No Implied Waivers.......................................... 48
18. NOTICES........................................................... 49
19. ENTIRE AGREEMENT.................................................. 50
20. SEVERABILITY AND CONSTRUCTION..................................... 50
20.1 Severability................................................ 50
20.2 No Implied Rights........................................... 50
21. MISCELLANEOUS..................................................... 51
21.1 Arbitration................................................. 51
21.2 Survival 52
21.3 Injunctive Relief........................................... 52
21.4 Legal Fees.................................................. 52
21.5 Language.................................................... 52
22. ACKNOWLEDGEMENTS.................................................. 53
</TABLE>
EXHIBITS
- --------
EXHIBIT A - Music Services
EXHIBIT B - Adjunct Services
EXHIBIT C - Proprietary Marks
EXHIBIT D - List of Agreements with Existing Affiliates
EXHIBIT E - Delivery Methods and Technical Specifications
EXHIBIT F - Adjunct Services Agreement
EXHIBIT G - Affiliate Agreement
iii
<PAGE>
MUZAK(R)
MASTER AFFILIATE AGREEMENT
This agreement ("Agreement") is made and entered into effective the 1st day
of March, 1992, by and between MUZAK LIMITED PARTNERSHIP, a Delaware limited
partnership ("Muzak"), and AUDIOPLAN, S.A., a Mexican corporation ("Master
Affiliate"), (collectively, the "Parties").
RECITALS
WHEREAS, Muzak has developed and owns a system (the "Muzak System") for the
production and delivery of subscription music services, adjunct communications
services, and related equipment;
WHEREAS, the characteristics of the Muzak System include, without
limitation, subscription music services, with unique and varied program contents
developed using distinctive and, in some cases, proprietary program-scheduling
techniques, which are set forth in Exhibit A attached hereto and incorporated
herein by reference (the "Music Services"); distinctive adjunct services
relating to the sequencing, switching, and changing of music-program
communications and to the delivery of advertising, data, and video
communications, which are set forth in Exhibit B (the "Adjunct Services"); and
delivery methods and procedures for both the Music Services and the Adjunct
Services (jointly, the "Services");
WHEREAS, the Services are distributed to customers (the "Subscribers") who
enter into agreements (the "Subscriber
1
<PAGE>
Contracts") providing for receipt of the Services at certain locations (the
"Subscriber Premises");
WHEREAS, Muzak identifies the Muzak System and the Services marketed
thereunder by means of certain trade names, service marks, trademarks, logos,
emblems, and indicia of origin, including but not limited to the mark "MUZAK(R)"
and such other trade names, service marks, and trademarks as are set forth in
Exhibit C attached hereto and incorporated herein by reference (the "Proprietary
Marks"), which Proprietary Marks represent Muzak's high standards of quality and
service;
WHEREAS, Master Affiliate understands and acknowledges that Muzak has
granted to a number of entities in the United States of Mexico ("Mexico") as set
out in Exhibit D (the "Existing Affiliates") the exclusive right to operate
under the Muzak System in specified territories, as further set out in Exhibit D
(the "Existing Affiliate Territories"), and
WHEREAS, Master Affiliate desires to obtain certain exclusive rights to
market and distribute the Services in Mexico and to grant others certain rights
to market and distribute the Services in Mexico, subject to the terms and
conditions of this Agreement;
NOW, THEREFORE, the Parties, in consideration of the undertakings and
commitments of each Party to the other Party set forth herein, hereby agree as
follows:
1. GRANT
-----
1.1 Rights Granted. Muzak hereby exclusively grants to Master Affiliate,
--------------
subject to the rights of the Existing
2
<PAGE>
Affiliates under their existing contracts with Muzak (the "Existing Contracts")
(including certain exclusive rights to distribute the Services (except by means
of DBS) and use the Marks in certain areas in Mexico), and upon the terms and
conditions herein contained:
1.1.1 The right and license to engage in Mexico in the business of
providing to Subscribers, pursuant to Subscriber Contracts, by such delivery
methods as shall be reasonably approved from time to time by Muzak (which
delivery methods include, as of the date hereof, those described in Exhibit E
attached hereto and incorporated herein by reference), the Services and such
additional music and communications services as Muzak may authorize in writing,
from time to time, and to use the Proprietary Marks in connection therewith.
1.1.2 The right to license others ("Affiliates") to engage in the
business of providing the Services to Subscribers in Mexico pursuant to
Subscriber Contracts, and by such delivery methods as shall be reasonably
approved from time to time by Muzak and Master Affiliate (which delivery methods
include, as of the date hereof, those described in Exhibit E), and to use the
Proprietary Marks in connection therewith. All Affiliates shall execute an
affiliate agreement ("Affiliate Agreement") in accordance with Section 5.5 of
this Agreement.
1.1.3 Subject to the rights of the Existing Affiliates under the
Existing Contracts, Master Affiliate and Affiliates shall provide the Services
solely to Subscriber Premises located within Mexico.
3
<PAGE>
1.1.4 Muzak represents and warrants that it has the right to grant
the license as herein set forth without interference by or claim of any third
person, excluding any interference or claim made by an Existing Affiliate
pursuant to an Existing Contract. Muzak further represents and warrants that it
has provided to Master Affiliate complete copies of all Existing Contracts and
that, as of the date hereof, it has no knowledge of any interference or claim
(or potential claim) by any Existing Affiliate against Muzak that would
adversely affect Muzak's or Master Affiliate's ability to perform its
obligations hereunder. Master Affiliate hereby acknowledges its receipt of the
copies of the Existing Contracts.
1.1.5 The geographic area in which Master Affiliate is licensed to
provide the Services and to license others to provide the Services hereunder,
which excludes the Existing Affiliate Territories of Existing Affiliates
pursuant to Existing Contracts until such time as Master Affiliate has rights
therein pursuant to this Agreement, is hereinafter described as the "Licensed
Area."
1.2 Limitations on Muzak. Except as provided in Section 1.3 below and
--------------------
otherwise in this Agreement, during the term of this Agreement, Muzak shall not
authorize any person or entity other than Master Affiliate or the Affiliates to
(i) provide the Services in the Licensed Area, or (ii) use the Proprietary Marks
in the Licensed Area. In the event that after the date hereof Muzak distributes
subscription music services or communications services in the nature of the
Adjunct Services that are also
4
<PAGE>
suitable for delivery in the Licensed Area, Muzak shall amend Exhibit A or
Exhibit B, as the case may be, in the manner provided in Section 3.1 (including
the requirement of at least six months' prior notice to Master Affiliate of such
amendment) to add such new services hereto, thereby giving Licensee the right
and the obligation to distribute such Services in the Licensed Area under the
terms of this Agreement.
1.3 Rights Retained. Master Affiliate acknowledges that Muzak retains
---------------
the following rights:
1.3.1 To use, and to license others to use, the Muzak System and the
Proprietary Marks for the provision of the Services to Subscriber Premises which
are located outside the Licensed Area.
1.3.2 To provide the Services, and to use the Proprietary Marks in
connection therewith, to transportation common carriers (including, without
limitation, operators of automobiles, ships, airplanes, trains, or buses) which
sell or provide transportation common carrier services, in whole or in part,
within the Licensed Area, it being understood that the reservation of such right
shall not be construed as limiting the right of Master Affiliate or the
Affiliates to provide the Services to transportation common carriers located
wholly within the Licensed Area.
1.3.3 To perform Muzak's obligations under the Existing Contracts;
provided, however, that in renewing any Existing Contract in accordance with its
terms, Muzak shall not expand the applicable Existing Affiliate Territory or
otherwise
5
<PAGE>
materially amend or modify the Existing Contract without the consent of Master
Affiliate, which consent shall not be unreasonably withheld.
1.4 Existing Affiliate Territories. Exhibit D hereto contains a list of
------------------------------
Existing Affiliates and Existing Affiliate Territories.
2. TERM AND RENEWAL.
----------------
The term of this Agreement shall commence as of the date first written
above and shall continue for five (5) years thereafter (the "Initial Term") and
then shall thereafter continue for one (1) additional five (5) year term (the
"Subsequent Term") if Master Affiliate elects to continue the Agreement for such
Subsequent Term and notifies Muzak of such election no later than twelve (12)
months prior to the end of the Initial Term and if the parties then agree as to
the royalties and fees to be paid to Muzak by Master Affiliate during the
Subsequent Term; provided, however, that Master Affiliate shall have no right to
elect to extend the term of this Agreement for the Subsequent Term if Master
Affiliate is in default (as "default" is defined in Article XII) of any material
provision of this Agreement or any related agreement between Master Affiliate
and Muzak, or if Master Affiliate was repeatedly in default of any such
contracts during the term hereof. If Master Affiliate elects to continue the
Agreement for the Subsequent Term, this Agreement shall be modified to reflect
such agreed royalties and fees and otherwise to correspond to the form of
agreement which
6
<PAGE>
Muzak is then bona fide offering to its international Master Affiliates (or
prospective Master Affiliates).
3. DUTIES OF MUZAK
---------------
3.1 Services. Muzak shall supply the Services to Master Affiliate, and
--------
the Affiliates, for their use solely in accordance with the terms of this
Agreement and the Affiliate Agreements. Muzak reserves the right to add a
Service and, except with respect to the "Environmental Music by MUZAK(R)" and
the "Foreground Music One(R)" Music Services, to substitute a different Service
or discontinue the distribution of a Service, if Muzak reasonably determines
that such addition, substitution, or discontinuation will be beneficial to its
business and the business of its licensees in general in Mexico and gives Master
Affiliate at least six (6) months' prior notice of such addition, substitution
or discontinuation. Any such addition, substitution or discontinuation will be
reflected in an amendment of Exhibit A or Exhibit B, as the case may be, and
will not affect the validity of this Agreement, which shall, in all respects, be
deemed modified to provide for such addition, substitution, or discontinuation.
3.2 DBS Delivery. In the event that Muzak delivers to Subscribers of
------------
Master Affiliate in the Licensed Area by "Direct-Broadcast Satellite" ("DBS")
(i.e., the satellite transmission of Services by Muzak directly to the premises
of the Subscriber), the following shall apply:
(a) Muzak shall, promptly after receipt of written notice from
Master Affiliate, commence DBS delivery of the
7
<PAGE>
Services to such Subscribers who have satellite receivers and associated
antennae ("Earth Stations") suitable for receipt of such delivery. Muzak shall
not discontinue such DBS delivery to such Subscribers until the earlier of the
following: (A) the date which Master Affiliate designates, or (B) one hundred
eighty (180) days after the effective date of the termination or expiration
(without renewal of license rights) of this Agreement. In the event Muzak
discontinues delivery of Services in violation of this subsection (a), Muzak
agrees to the granting of a temporary injunction against it on the condition
that the duration of such injunction does not exceed ten (10) days. Such
injunction may be granted on an ex parte basis if Muzak fails to appear at the
-- -----
hearing following forty-eight (48) hours' notice by telephone to the twenty-four
(24) hour telephone number of the Muzak DBS Division. During the ten (10) day
temporary injunction period, Master Affiliate may seek to have such temporary
relief converted to a permanent injunction in a hearing on the merits following
appropriate notice to Muzak.
(b) During the above-referenced 180-day (or shorter, if Master
Affiliate so designates) period, Master Affiliate shall remain obligated to
perform the duties and be subject to the restrictions applicable to it under the
terms of this Agreement with respect to such continuing DBS delivery of the
Services, including without limitation those terms which obligate Master
Affiliate to pay royalties, fees, charges, and surcharges with respect to such
DBS Services. During such 180-day (or shorter) period, under no circumstances
shall Master Affiliate use the
8
<PAGE>
Proprietary Marks except as necessary in association with the continuing
provision of the Services by DBS to such Subscribers. During such period Muzak
shall not be precluded from appointing one or more distributors of the Services
in the Licensed Area and from giving to such distributors any rights previously
accorded to Master Affiliate under this Agreement.
3.3 Recorded Media.
--------------
3.3.1 Certain Services, as reasonably designated by Muzak, may be
delivered by means of, among other things, magnetic tape or compact disc, in
analog or digital form (the "Recorded Media"). Muzak shall at all times retain
title to, and all ownership rights in, any Recorded Media furnished to Master
Affiliate, Affiliates, or Subscribers. Master Affiliate shall not sell, assign,
transfer, convey, give away, pledge, mortgage, or otherwise encumber any such
Recorded Media, and shall prohibit the Affiliates and Subscribers in the
Licensed Area from taking any such action. Master Affiliate shall promptly
notify Muzak in the event it becomes aware that any Affiliate or Subscriber has
violated any such prohibition, cooperate with Muzak in the immediate termination
of the provision of Services to any Affiliate or Subscriber which has violated
any such prohibition, and take such further action as is reasonably requested by
Muzak to enforce such prohibition.
3.3.2 Muzak and Master Affiliate agree that, during the first three
(3) months of the term of this Agreement, they shall cooperate with each other
to obtain such mechanical license rights as may be necessary in order for Muzak
to distribute one
9
<PAGE>
or more of its Services to Master Affiliate in the Licensed Area by means of
on-premise Recorded Media. In the event that such license rights cannot be
obtained within such 3-month period, Master Affiliate shall have the right to
distribute music services to its Subscribers by means of on-premise Recorded
Media that have not been produced by Muzak until 60 days after Muzak notifies
Master Affiliate that it has obtained such license rights. Master Affiliate's
failure to substitute Muzak-produced Recorded Media for all such other Recorded
Media by the end of such 60-day period shall, at Muzak's option (which option
shall be exercised, if at all, by no later than 120 days after the conclusion of
such 60-day period), result in a termination (without penalty) of this
Agreement.
3.4 Adjunct Services. All sales of the Adjunct Services by Master
----------------
Affiliate and Affiliates shall be reflected in a fully executed Adjunct Services
Subscriber Contract, the form of which is attached hereto as Exhibit F, as such
Contract is revised or modified from time to time for the use of Muzak's
licensees in general. Master Affiliate shall provide Muzak with the Adjunct
Services Subscriber Contract, executed by Master Affiliate or an Affiliate (as
the case may be) and the Subscriber, at the time Master Affiliate requests Muzak
to commence delivery of one or more Adjunct Services to the Subscriber.
3.5 DBS. Notwithstanding any other provision or term of this Agreement
---
to the contrary, the Parties understand and agree that (i) the Services will not
be delivered by means of DBS to any person in the Licensed Area until such date
as all required
10
<PAGE>
governmental permits and authorizations for such delivery have been received
and, except as to such northern portions of the Licensed Area as are within the
footprint of Muzak's U.S.-based DBS delivery, Master Affiliate has formulated a
technical implementation plan for such delivery throughout such Licensed Area
(the "DBS Delivery Date"), which plan Muzak has approved in writing; and (ii)
accordingly, those Services that are delivered only by means of DBS, including
the Adjunct Services, cannot be supplied by Muzak except as to such northern
portions of the Licensed Area as are within the footprint of Muzak's U.S.-based
DBS delivery (provided Licensee has obtained the appropriate permits and
authorizations in such northern portions), and will not be required to be
promoted by Master Affiliate hereunder prior to the DBS Delivery Date. The
technical implementation plan described in the preceding sentence will require
Master Affiliate to be responsible for the space segment transmission capacity
required for DBS delivery into all or part of the Licensed Area.
3.6 Mechanical and Performance Rights. Muzak makes no warranties or
---------------------------------
representations whatsoever regarding mechanical recordation rights or
performance rights within the Licensed Area for the musical selections contained
in the Music Services. Master Affiliate shall obtain and maintain, or shall
cause the Affiliates to obtain and maintain, all performance rights in and for
the musical selections contained in the Music Services to the extent that such
action may be necessary or required for the operation of the business licensed
to Master Affiliate hereunder
11
<PAGE>
and the performance of the Services within the Licensed Area, as well as all
mechanical recordation rights as needed for any musical recordation activities
carried on by Master Affiliate. Without limiting the generality of the
foregoing, Master Affiliate represents and warrants that it now holds, and
agrees that it will at all times hereafter hold, all performance-rights licenses
necessary to permit it to distribute the Services in the Licensed Area and,
without limiting Section 5.4, all mechanical recordation rights necessary for
any reproduction by Master Affiliate of the Music Services for distribution to
Affiliates and Subscribers. Master Affiliate agrees to provide copies of such
licenses to Muzak upon request.
4. FEES
----
4.1 Royalty Fees.
------------
4.1.1 Master Affiliate shall pay to Muzak a monthly royalty fee as
follows:
<TABLE>
<CAPTION>
Months of Initial
Term of Agreement Monthly Fee
----------------- -----------
<S> <C>
1-12 U.S. $2,000
13-24 2,000
25-36 2,917
37-48 3,333
49-60 3,750
</TABLE>
4.1.2 Until the completion of the technical implementation plan
described in Section 3.5 and the parties' agreement as to royalty fees
associated with such plan, and in addition to the royalty fees set forth in
Section 4.1.1, Master Affiliate shall pay to Muzak a monthly royalty fee in the
amount
12
<PAGE>
of U.S. $5.00 for each Subscriber in the Licensed Area which receives any
DBS-delivered Services.
4.2 Adjunct Services Charges. Master Affiliate shall pay Muzak's Adjunct
------------------------
Services charges in accordance with the terms negotiated by the parties for all
Adjunct Services distributed to Master Affiliate, the Affiliates and Subscribers
in the Licensed Area.
4.3 Recorded Media Charges. At such time as Muzak provides Services to
----------------------
Master Affiliate, Affiliates, or Subscribers in the Licensed Area by means of
Recorded Media, Master Affiliate shall pay Muzak's standard Recorded Media
charges, as the same may be set forth by Muzak from time to time in writing, for
all Recorded Media distributed to Master Affiliate, Affiliates, or Subscribers.
Muzak shall not increase such Recorded Media charges prior to January 1, 1993,
and increases thereafter shall not exceed ten percent (10%) per annum; provided,
however, that if the costs to Muzak of delivering Recorded Media to the Licensed
Area increase, the foregoing shall not limit Muzak's ability to recoup such
increase in costs from Master Affiliate.
4.4 Payments.
--------
4.4.1 All payments due to Muzak under this Agreement and with
respect to equipment ordered from or through Muzak shall be paid in U.S. Dollars
in the manner directed by Muzak from time to time. Without limiting the
foregoing, Muzak may require that such payments be made through one or more
commercial or standby letters of credit. The inability of Master Affiliate to
make full and timely payment of amounts owed to
13
<PAGE>
Muzak at Muzak's U.S. office and in U.S. dollars shall, at the discretion of
Muzak, be grounds for immediate termination of this Agreement by Muzak.
4.4.2 All monthly payments required by this Article 4 shall be paid
within 30 days of the end of the month to which they apply and shall be
submitted to Muzak together with any reports or statements required under
Article 9 hereof. Any payment of fees due to Muzak that is not actually received
by Muzak on or before the due date shall be deemed overdue. If any payment is
overdue, Master Affiliate shall pay Muzak, in addition to the overdue amount,
interest on such overdue payment, which shall accrue on a daily basis from the
due date until the date of payment, at the lesser of (i) the prime rate of The
First National Bank of Chicago plus 2% per annum, or (ii) the highest rate of
interest permitted by law. Entitlement to such interest shall be in addition to
any other remedies Muzak may have under law or this Agreement as a result of the
overdue payment.
4.5 Affiliate Fees. In addition to all other fees and charges payable to
--------------
Muzak under this Agreement, Master Affiliate shall pay to Muzak the following
amounts:
(a) With respect to each Existing Affiliate who becomes an
Affiliate, 70% of all royalty fees paid to Master Affiliate by each such
Affiliate, 70% of all transfer fees paid to Master Affiliate with respect to the
Affiliate Agreement of each such Affiliate, and 100% of all market fees paid to
Master Affiliate by each such Affiliate, and
14
<PAGE>
(b) With respect to all other Affiliates, but only in years 3, 4,
and 5 of this Agreement 70% of all market fees paid to Master Affiliate by such
Affiliates.
(c) Master Affiliate shall pay all amounts due to Muzak under this
Section 4.5 by no later than 30 days after Master Affiliate's receipt of such
royalty, transfer, and market fees. Master Affiliate specifically acknowledges
and agrees that Muzak shall have the unilateral right, exercisable in its sole
discretion, to terminate the Affiliate Agreement of any Affiliate who fails to
pay all amounts due to Master Affiliate thereunder in a timely manner and that
Master Affiliate shall cooperate with Muzak in carrying out any such
termination.
5. DUTIES OF MASTER AFFILIATE
--------------------------
5.1 Development of Mexican Market and Use of Muzak Name.
-----------------------------------------------------
5.1.1 Master Affiliate shall use and promote the Proprietary Marks,
including the MUZAK(R) name, in the Licensed Area; provided, however, that such
obligation shall not preclude Master Affiliate from using its own name in
juxtaposition with the MUZAK(R) name. Without limiting the generality of the
foregoing, Master Affiliate shall cooperate with Muzak to produce sales and
marketing literature for the Mexican market that promotes the MUZAK(R) name and
other Proprietary Marks and the Services of Muzak and shall distribute such
sales literature to the Affiliates, Subscribers, and prospective Subscribers.
Master Affiliate shall place the MUZAK(R) name on all Subscriber Contracts.
5.1.2 In addition to any other expenditure of Master Affiliate
required hereunder, Master Affiliate shall
15
<PAGE>
expend at least the following amounts to develop the Mexican market for the
Services and to promote the MUZAK(R) Mark:
<TABLE>
<CAPTION>
Time Period Minimum Expenditure
----------- -------------------
<S> <C>
First 12-month period of this Agreement U.S. $26,000
Second 12-month period of this Agreement 26,000
Third 12-month period of this Agreement 15,000
Fourth 12-month period of this Agreement 10,000
Fifth 12-month period of this Agreement 5,000
</TABLE>
Such expenditures shall be made in the manner agreed to by Muzak. Master
Affiliate shall provide such records and evidence of such expenditures as are
reasonably requested by Muzak from time to time.
5.2 Service Delivery Equipment; Permits and Approvals.
-------------------------------------------------
5.2.1 Master Affiliate agrees to deliver and to cause Affiliates to
deliver the Music Services by such means as meet the standards and technical
specifications set forth in Exhibit E attached hereto and incorporated herein by
reference. Master Affiliate shall also obtain and maintain such equipment
(including, as applicable, Earth Stations) as is reasonably required to enable
Master Affiliate to receive and distribute the Services and shall, directly or
through the Affiliates, obtain and make available to the Subscribers such
equipment as is reasonably required to enable the Subscribers to receive the
Services (collectively, the "Service Delivery Equipment"). The Service Delivery
Equipment, except Subscriber-owned equipment that is not sold to the Subscriber
by Master Affiliate or an Affiliate, shall conform to the standards and
specifications set forth in Exhibit E as in effect on the date Master Affiliate
or an Affiliate installs such Equipment. Muzak may modify such
16
<PAGE>
standards and specifications from time to time if Muzak reasonably believes that
such modifications are necessary to maintain or improve the quality of delivery
of the Services to Subscribers or to maintain or improve the effectiveness or
quality, or reduce the price, of the Service Delivery Equipment (as hereinafter
defined); provided, however, that no such modifications shall have the effect of
rendering the Earth Stations then in use by Master Affiliate, Affiliates, or
Subscribers in the Licensed Area for reception of the Services incapable of
receiving satellite transmissions, or any other equipment then in use by Master
Affiliate, Affiliates or Subscribers in the Licensed Area for the reception of
the Services incapable of receiving the Services, unless such modifications are
necessitated by law or by the exercise of the rights of third parties under the
express terms of Muzak's satellite-space contracts; and provided further, that
Muzak shall provide Master Affiliate with six (6) months' prior notice of any
changes to those standards and specifications in Exhibit E that pertain to the
Service Delivery Equipment.
5.2.2 Master Affiliate shall, at its expense, obtain and maintain
any Mexican governmental permits and approvals which are required for the
installation and operation of the Service Delivery Equipment to be used by
Master Affiliate in providing the Services to its Subscribers. Muzak shall, at
its expense, obtain and maintain any non-Mexican (i.e., U.S.) governmental
permits and approvals which are required for the installation and operation of
the Service Delivery Equipment to
17
<PAGE>
be used by Master Affiliate in providing the Services to its Subscribers. Master
Affiliate shall, at its expense, obtain and maintain any registration of this
Agreement and the Affiliate Agreements required under the Transfer of Technology
Law, Law on the Promotion and Protection of Industrial Property, or any other
law or regulation of Mexico or any locality in Mexico applicable to this
Agreement and shall indemnify Muzak for any and all losses or liabilities
incurred in connection with Master Affiliate's failure to obtain and maintain
any such registration.
5.3 Modification Prohibited. Master Affiliate shall not alter the
-----------------------
Services provided by Muzak and shall not substitute or include any musical or
other selections which are not part of the Music Services in the Music Services
which it furnishes to Affiliates or Subscribers (except in extraordinary
circumstances, with the prior written consent of Muzak, which consent shall not
be unreasonably withheld). Master Affiliate shall also use its best efforts to
assure that there is no such alteration or substitution by the Affiliates.
Notwithstanding the foregoing, in the event that Muzak fails to provide the
Music Services (other than those provided on Recorded Media) for a period of 24
hours and does not correct such failure within the 24-hour period following
notice to Muzak thereof, Master Affiliate shall have the right to provide other
music services to the Subscribers until such time as such failure is corrected.
Master Affiliate shall under no circumstances represent or indicate that any
Service not produced by Muzak has been produced by Muzak.
18
<PAGE>
5.4 Unauthorized Reception or Duplication. Master Affiliate shall use
-------------------------------------
its best efforts to assure that there is no unauthorized reception of the
Services as provided to Master Affiliate, Affiliates, and Subscribers. Upon the
request of Muzak, Master Affiliate shall take such reasonable steps as may be
necessary to improve the security of the Service Delivery Methods so as to
prevent any such unauthorized reception. Master Affiliate shall not reproduce
all or any part of the Services unless Master Affiliate has all licenses
required under U.S. and Mexican law to carry out such reproduction. Master
Affiliate shall indemnify and hold harmless Muzak, its partners, officers,
directors, employees, agents, successors, and assigns for any loss, claim,
demand, action, suit, proceeding, liability, judgment, cost and expense
(including, without limitation, attorneys' fees and costs) arising from Master
Affiliate's reproduction of the Services in violation of the rights of any
person or entity or otherwise in violation of this Agreement. Master Affiliate
shall provide an accounting to Muzak of all Services which are reproduced.
Master Affiliate shall not permit any other person to reproduce the Services and
shall obtain a written agreement from Affiliates and, to the extent reasonably
possible, all Subscribers, in such form as shall be approved by Muzak, acting
reasonably, prohibiting the reproduction of all or any part of the Services.
19
<PAGE>
5.5 Execution of Affiliate Agreements.
---------------------------------
5.5.1 In accordance with Section 1.1.2, Master Affiliate shall
require each Affiliate to execute the form of Affiliate Agreement attached
hereto as Exhibit G or such amended form thereof as is consented to in writing
by Muzak (whose consent shall not be unreasonably withheld). Master Affiliate
shall amend an Affiliate Agreement only with the prior written consent of Muzak,
which shall not be unreasonably withheld. Each Affiliate Agreement shall be
executed by both Muzak and Master Affiliate and Muzak shall not unreasonably
refuse to execute an Affiliate Agreement that complies with this Section 5.5.1
and Section 5.5.2. Master Affiliate shall provide Muzak with copies of each
fully executed Affiliate Agreement. In addition, Master Affiliate shall provide
Muzak with copies of every ancillary and collateral agreement executed in
conjunction with an Affiliate Agreement.
5.5.2 Master Affiliate shall offer each Existing Affiliate the
opportunity to execute an Affiliate Agreement. Notwithstanding Section 1.3.3 of
this Agreement, Master Affiliate and Muzak shall cooperate in attempting to
convince Existing Affiliates to execute the Affiliate Agreement on such terms as
are acceptable to both Master Affiliate and Muzak; provided, however, that
Master Affiliate shall not enter into any Affiliate Agreements with any Existing
Affiliate until such time as such Existing Affiliate has paid in full all
amounts then owing to Muzak.
20
<PAGE>
5.6 Enforcement of Affiliate Agreements. Muzak and Master Affiliate
-----------------------------------
shall each faithfully and promptly perform all of the obligations required of
Muzak and Master Affiliate, respectively, under the Affiliate Agreements, and
shall each have the right to enforce the obligations of the Affiliate under each
Affiliate Agreement. Master Affiliate shall promptly notify Muzak of any breach
of the Affiliate Agreement by an Affiliate.
5.7 Staff. Master Affiliate shall maintain such staff as is reasonably
-----
required to meet its day-to-day obligations hereunder.
5.8 Sales Growth. Master Affiliate shall use its best efforts to meet
------------
its obligations hereunder to promote the Services in the Licensed Area and shall
otherwise conduct the business contemplated by this Agreement in a diligent
manner. Without limiting the generality of the foregoing, prior to the beginning
of each consecutive 12-month period during this Agreement, with the first such
period to begin January 1, 1993, Muzak and Master Affiliate shall mutually set a
Services sales goal for Master Affiliate and the Affiliates. Such goal shall be
based on the amount of sales of the various Services which Muzak and Master
Affiliate mutually believe can be attained by Master Affiliate and the
Affiliates during such 12-month period, taking into consideration such factors
as the size and other distinctive characteristics of the Licensed Area, the size
and trend of past sales of Services within the Licensed Area, and economic
conditions affecting the Licensed Area. Master Affiliate shall use its best
efforts to meet and to cause the Affiliates to meet
21
<PAGE>
such sales goals during each respective 12-month period. The foregoing shall not
be deemed to preclude Master Affiliate from providing to a Subscriber other
services that are not the same as, similar to, or competitive with the Services.
5.9 Performing Rights Agreements. In addition to the mechanical-
----------------------------
recordation rights licenses referred to elsewhere in this Agreement, Master
Affiliate shall be responsible for obtaining and maintaining valid performing
rights licenses with all appropriate performing rights organizations for
performance of the Services at Subscriber Premises in the Licensed Area.
5.10 Central Warehouse. Master Affiliate shall use reasonable efforts to
-----------------
develop and maintain a facility to sell, and to facilitate the sale by third
parties, to Affiliates of such equipment as would ordinarily be required by
Affiliates under the Affiliate Agreement.
5.11 Training Programs. Master Affiliate shall use reasonable efforts to
-----------------
develop and offer training programs to the Affiliates, at least annually, in
order to provide the Affiliates with guidance and assistance in the operation of
their businesses as licensed under the Affiliate Agreements, including the
marketing and distribution of the Services. Muzak shall offer reasonable
assistance to Master Affiliate in structuring such training programs, such as
providing training information for Master Affiliate's trainers.
22
<PAGE>
6. PROPRIETARY MARKS
-----------------
6.1 Muzak Representations. Muzak represents and warrants that it is the
---------------------
owner of all right, title, and interest in and to the Proprietary Marks. Muzak
will take all steps reasonably necessary to preserve and protect its ownership
and the validity of the Proprietary Marks.
6.2 Validity and Infringement. Master Affiliate expressly acknowledges
-------------------------
and agrees that the Proprietary Marks serve to identify the Services and those
who are authorized to distribute the Services. During the term of this
Agreement, Master Affiliate shall not directly or indirectly contest the
validity or Muzak's ownership of the Proprietary Marks or take any action which
it ought reasonably to have known would impair the validity or enforceability of
the Proprietary Marks, and shall prohibit the Affiliates from making any such
contest or taking any such action. Master Affiliate shall, and shall require all
Affiliates to, promptly notify Muzak of any suspected infringement of the
Proprietary Marks, any challenge to the validity of the Proprietary Marks, or
any challenge to Muzak's ownership of, Muzak's right to use and to license
others to use, or Master Affiliate's or Affiliate's right to use, the
Proprietary Marks of which Master Affiliate or an Affiliate, as the case may be,
becomes aware. Master Affiliate acknowledges that Muzak has the right to direct
and control (at its expense) any administrative proceeding or litigation
involving the Proprietary Marks, including any settlement thereof. Muzak has the
right, but not the obligation, to take action against uses by
23
<PAGE>
others that may constitute infringement of the Proprietary Marks; provided,
however, that Muzak may authorize Master Affiliate to take such action at
Muzak's expense in the event Muzak determines not to do so. Muzak shall defend
Master Affiliate and the Affiliates against any third-party claim, suit, or
demand arising out of Master Affiliate's or any Affiliate's use of the
Proprietary Marks in the manner provided hereunder; provided, however, that in
the event that such claim, suit or demand arises in connection with reproduction
of the Services permitted pursuant to Section 5.4 hereof, Muzak may, but shall
not be required to so defend Master Affiliate or such Affiliate. If Muzak
determines that Master Affiliate or any Affiliate has not used the Proprietary
Marks in accordance with this Agreement, or such use was in connection with
reproduction of the Services pursuant to Section 5.4 hereof, the cost of such
defense, including the cost of any judgment or settlement, shall be borne by
Master Affiliate of Affiliate, as the case may be. In the event Muzak undertakes
the defense or prosecution of any litigation relating to Master Affiliate's or
any Affiliate's use of the Proprietary Marks, Master Affiliate agrees to, and to
have any Affiliate, execute any and all documents and to do such acts and things
as may be necessary to carry out such defense or prosecution, including, but not
limited to, becoming a nominal party to any legal action, at Muzak's expense
(except as otherwise provided above).
24
<PAGE>
6.3 Authorized Use. With respect to Master Affiliate's and Affiliates'
--------------
use of the Proprietary Marks pursuant to this Agreement, Master Affiliate agrees
that:
6.3.1 Master Affiliate shall use and shall license Affiliates to
use, only the Proprietary Marks designated by Muzak. Master Affiliate's and the
Affiliates' right to use the Proprietary Marks is limited to such uses as are
authorized under this Agreement, and any unauthorized use thereof shall
constitute an infringement of Muzak's rights.
6.3.2 Master Affiliate shall not use and shall not in any way
authorize Affiliates to use the Proprietary Marks as part of its corporate or
other legal name. Master Affiliate shall, and shall require all Affiliates to,
comply with Muzak's instructions in filing and maintaining the requisite
registered user and trade name or fictitious name registrations, and execute any
documents deemed necessary by Muzak or its counsel to obtain protection for the
Proprietary Marks or to maintain their continued validity and enforceability.
Master Affiliate shall, and shall require all Affiliates to, sign a registered
user application prepared by Muzak for submission to the Mexican Trade Marks
Office, the filing and cost of which shall be the responsibility of Muzak.
Master Affiliate shall promptly sign an application to cancel the registration
of its registered user application upon expiration, non-renewal, or termination
of this Agreement or Master Affiliate's assignment of this Agreement if
permitted under Article 11 and shall similarly require terminating, non-renewing
or assigning Affiliates to execute such
25
<PAGE>
an application. Master Affiliate shall assist Muzak by having its assignee
promptly sign such a registered user application. All such assignee registered
user applications and all such applications for cancellation of the registration
of a registered user application shall be in such form as is consistent with the
terms of this Agreement and shall be prepared by Muzak for submission to the
Mexican Trade Marks office, the filing and costs of all of which shall be the
responsibility of Muzak.
6.3.3 Master Affiliate shall not, and shall not permit any Affiliate
to, use the Proprietary Marks to incur any obligation or indebtedness on behalf
of Muzak.
6.3.4 Unless otherwise authorized or required by Muzak, Master
Affiliate shall, and shall require all Affiliates to, use the Proprietary Marks
without prefix or suffix and comply with Muzak's instructions regarding (i) the
use of the U.S. federal registration symbol and other trademark or service mark
designations, (ii) the identification of Muzak as the owner and Master Affiliate
or Affiliate, as the case may be, as a user of the Proprietary Marks, and (iii)
the identification of Master Affiliate or Affiliate, as the case may be, as the
independent owner and operator of its business.
6.4 Execution of Documents. Master Affiliate shall, and shall require
----------------------
all Affiliates to, execute such documents as are reasonably required by Muzak or
its counsel to obtain protection for the Proprietary Marks or to maintain their
continued validity and enforceability.
26
<PAGE>
6.5 Ownership of Goodwill. Master Affiliate expressly understands and
---------------------
acknowledges that Muzak is the owner of all right, title, and interest in and to
the Proprietary Marks and the goodwill associated with and symbolized by them.
Master Affiliate's use of the Proprietary Marks pursuant to this Agreement
(including Master Affiliate's right to license Affiliates to use the Proprietary
Marks) does not give Master Affiliate any ownership interest or other interest
in or to the Proprietary Marks, except the license granted by this Agreement.
Master Affiliate shall not, and shall not permit any Affiliate to, register or
attempt to register the Proprietary Marks, trade names, or other marks now or
hereafter used by Muzak, or any trade names or marks which are, in Muzak's
opinion, confusingly similar thereto. Upon termination or expiration of this
Agreement, any and all goodwill arising from Master Affiliate's or any
Affiliate's use of the Proprietary Marks under the Muzak System shall inure
solely and exclusively to Muzak's benefit and no monetary amount shall be
assigned as attributable to any goodwill associated with Master Affiliate's or
any Affiliate's use of the Muzak System or Proprietary Marks.
6.6 Substitution of Proprietary Marks. Muzak reserves the right to add
---------------------------------
Proprietary Marks and, except with respect to the MUZAK(R) trademark, to
substitute different Proprietary Marks, or discontinue the use of Proprietary
Marks, for use in identifying the Services if the Proprietary Marks no longer
can be used, or if Muzak determines that such addition, substitution, or
discontinuation will be beneficial to its business and
27
<PAGE>
provides to Master Affiliate at least six months' prior notice of such addition,
substitution, or discontinuation. All such additions, substitutions, or
discontinuations will be reflected in an amendment of Exhibit C and shall not
affect the validity of this Agreement, which shall, in all respects, be deemed
modified to provide for such addition, substitution, or discontinuation.
7. NATIONAL ACCOUNTS PROGRAM; CABLE RADIO/TELEVISION
-------------------------------------------------
7.1 National Accounts Program. Each of the Parties recognizes that
-------------------------
accounts with fifty (50) or more locations in two (2) or more Affiliate
territories in Mexico ("National Accounts") represent a significant potential
market for Master Affiliate and Affiliates marketing the Services, and that the
effective marketing of the Services to such accounts frequently requires a
coordinated effort. Master Affiliate shall establish and shall maintain as part
of its marketing and promotion, during the term of this Agreement, a National
Accounts Program. Muzak shall provide such assistance in the establishment and
maintenance of such National Accounts Program as Master Affiliate may from time
to time reasonably request. The National Accounts Program shall:
7.1.1 Identify key customers.
7.1.2 Develop and execute specific strategies to sell to National
Accounts.
7.1.3 Maintain effective communication among Affiliates regarding
specific National Accounts.
7.1.4 Establish a centralized billing and administration capability
for National Accounts in keeping with Mexican law and practice.
28
<PAGE>
7.1.5 Utilize a form of agreement that requires the use of MUZAK(R)
Services during the term of the agreement and that provides that such
requirement is not subject to amendment; provided, however, that during any
period that Master Affiliate, in accordance with the terms of this Agreement, is
providing a National Account Subscriber with music by means of on-premise
Recorded Media that do not contain Muzak's Services, Master Affiliate shall use
a form of agreement for such Recorded Media that does not identify such Recorded
Media as produced by Muzak; and provided, further, that Master Affiliates'
National Account agreements may also provide for Mexican-produced programs of
Mexican music that are not MUZAK(R) Services.
7.2 Cable Radio/Television. In the event that (i) a provider of cable
----------------------
television or cable radio programming requests that Muzak provide music for such
programming that cannot otherwise be provided by Master Affiliate (or, as
applicable, the Affiliate) utilizing the Music Services, and (ii) such
programming will be distributed to residences (but not to commercial locations)
in the Licensed Area, then prior to Muzak's providing such music, Muzak and
Master Affiliate shall jointly determine their respective interests in the
revenues deriving from the provision of such music to such provider.
8. MARKETING AND PROMOTION
-----------------------
8.1 Submission of Samples. All advertising and promotion by Master
---------------------
Affiliate in any manner or medium shall be conducted in a dignified, honest and
ethical manner and shall not reflect adversely on the goodwill of Muzak, Master
Affiliate, Affiliates,
29
<PAGE>
the Proprietary Marks, or the Muzak System. Master Affiliate shall submit to
Muzak upon request samples of all advertising and promotional plans and
materials relating to the business licensed by this Agreement and the Affiliate
Agreements that Master Affiliate or Affiliates propose to use and which have not
been prepared by or previously submitted to Muzak. Master Affiliate shall amend
or discontinue use of and require Affiliates to amend or discontinue use of any
such advertising upon receipt of notice from Muzak that such advertising fails
to comply with the requirements of this Section 8.1. In the event that Muzak
notifies Master Affiliate to amend any advertising or promotional plans or
materials previously approved by Muzak's predecessors-in-interest, Master
Affiliate shall have up to 180 days after the date of such notice to make such
amendments.
8.2 Promotional Materials. Master Affiliate shall prepare and provide
---------------------
to the Affiliates sales and advertising materials, and shall provide reasonable
assistance to the Affiliates to enhance their marketing of the Services and
related equipment and products. Upon request, and subject to any third-party
rights limiting such provision, Muzak shall provide to Master Affiliate, at
cost, camera-ready copies of artwork used for U.S. sales and advertising of the
Services.
9. ACCOUNTING AND RECORDS
----------------------
9.1 Maintain Records; Inspection. Master Affiliate shall maintain and
----------------------------
shall preserve for at least four (4) years from the dates of their preparation,
full, complete, and accurate books, records, and accounts covering all
transactions relating to this
30
<PAGE>
Agreement or any prior license agreement between Muzak and Master Affiliate (the
"Records") in accordance with generally accepted accounting principles as
applied in Mexico and in the form and manner as may be reasonably prescribed by
Muzak from time to time in writing; upon the completion of the initial
inspection hereunder of Master Affiliate's business, such 4-year requirement
shall become a 2-year requirement. Such Records shall at all times be retained
at the principal place of business of Master Affiliate and shall be available
for inspection by Muzak from time to time until six (6) months following the
expiration of the final term of this Agreement, during reasonable business hours
and upon reasonable notice. Muzak shall have the right to make copies or
extracts (at its expense) of the Records. Muzak shall take reasonable
precautions to safeguard the confidentiality of such copies and shall destroy
any such copies upon the mutually-confirmed completion of the inspection and
payment in full of any royalties and other charges determined to be owing to
Muzak as a result of the inspection. Nothing contained herein shall be construed
as in any way limiting Muzak's right manually to copy or make abstracts of
Master Affiliate's or any affiliated person's (including the Affiliates) books
and records or to make any notes or the like whatsoever; provided that such
manual copies or extracts (and any copies thereof) shall be destroyed upon the
mutually-confirmed completion of the inspection. If such right is exercised by
Muzak with respect to the Records of Master Affiliate, any copying shall be at
Muzak's expense.
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<PAGE>
9.2 Monthly Reports. Master Affiliate shall submit to Muzak, together
---------------
with the monthly payments required by Article 4 hereof, a royalty report, in the
form as may be reasonably prescribed by Muzak, accurately reflecting all sales
of the Services by Master Affiliate and the Affiliates during the preceding
calendar month, and such other data or information covering the transactions
relating to this Agreement as Muzak may reasonably require.
9.3 Right to Audit. Master Affiliate shall, upon request of Muzak, but
--------------
not more than once in any twelve (12) month period, furnish to Muzak as soon as
practicable following such request, a detailed statement prepared by Master
Affiliate and certified by an independent licensed Accountant acceptable to
Muzak, showing, in such form as Muzak may reasonably request, all relevant
information within Master Affiliate's control to enable Muzak to determine and
verify the accuracy of the amounts payable to Muzak hereunder (the "Audit").
9.4 Assessments. In the event the Audit or Muzak's inspection indicates
-----------
that there has been either an underpayment or overpayment of the amounts due
Muzak hereunder, then, within thirty (30) days after such determination, Master
Affiliate or Muzak, as the case may be, shall pay to the other the amount of
such underpayment or overpayment. If it is determined that there has been an
underpayment of seventeen percent (17%) or more of the amounts due Muzak for any
given calendar year, Master Affiliate shall pay to Muzak, within thirty (30)
days after such determination and in addition to all other amounts due under
this
32
<PAGE>
Agreement, an amount equal to fifteen percent (15%) of the underpayment for that
year. The foregoing remedies shall be in addition to any other remedies Muzak
may have. Muzak shall not assess Master Affiliate for amounts found, as a result
of an inspection or Audit, to be owing hereunder if such amounts derive from a
reporting period that ended more than two years prior to the date such audit or
inspection commenced, provided that Master Affiliate has not knowingly
maintained false books or records or knowingly submitted false reports to Muzak;
provided, however, that the foregoing shall not apply until the completion of
Muzak's initial inspection of the Records of Master Affiliate after the
commencement of the term of this Agreement.
10. INSURANCE
---------
Master Affiliate has procured and shall maintain in full force and effect
at all times during the term of this Agreement, at Master Affiliate's expense,
an insurance policy or policies of the type and in an amount or amounts as is
consistent with prudent business practices as reasonably determined by Master
Affiliate for companies engaged in businesses similar to that engaged in by
Master Affiliate. Master Affiliate warrants that, to the best of its knowledge
after reasonable inquiry, the type and amount of such insurance is sufficient
under all applicable Mexican laws and regulations. Master Affiliate's obligation
to obtain and maintain the foregoing policy or policies shall not be limited in
any way by reason of any insurance which may be maintained by Muzak, nor shall
Master Affiliate's performance of
33
<PAGE>
its obligations under this Article 10 relieve it of liability under any
indemnity provisions set forth in this Agreement.
11. TRANSFER OF INTEREST
--------------------
11.1 Assignment by Muzak. Muzak may assign all or any of its rights and
-------------------
obligations under this Agreement, and shall promptly notify Master Affiliate of
any such assignment.
11.2 Change of Stock Ownership. For purposes of this Agreement, any
-------------------------
change of ownership of the stock of Master Affiliate that alone or together with
other previous, simultaneous, or proposed transfers of the stock of Master
Affiliate, would have the effect of directly or indirectly, changing the
ownership of 50% or more of the stock of Master Affiliate from such ownership as
it exists on the date hereof (as shown below), shall constitute a transfer of
the business licensed hereunder. Any such transfer of such business not
complying with the requirements of this Article 11 shall be immediately voided
or shall cause a default of this Agreement. Master Affiliate hereby represents
and warrants that its stock is currently owned as follows:
<TABLE>
<CAPTION>
Number of
Stockholder Class of Stock Shares Owned
----------- -------------- ------------
<S> <C> <C>
Arturo Zorilla M. and Common 70%
Veronica Ibarra C.
- --------------------------------- -------------- ------------
Joaquin Vargas C. Common 11%
- --------------------------------- -------------- ------------
Alfred King Common 9%
- --------------------------------- -------------- ------------
Vivian Cross Common 7%
- --------------------------------- -------------- ------------
Roberto Zorilla M. Common 3%
- --------------------------------- -------------- ------------
</TABLE>
Master Affiliate shall give notice to Muzak of all actual changes of ownership
of its stock, and all proposed changes of ownership that would constitute a
transfer of the business licensed hereunder.
34
<PAGE>
11.3 Assignment by Master Affiliate; Right of First Refusal. Master
------------------------------------------------------
Affiliate shall not transfer any of its rights or obligations under this
Agreement without the prior written consent of Muzak, which consent shall not be
unreasonably withheld, and Master Affiliate and its owners shall not transfer
the business licensed hereunder (i.e., either assets or stock) without first
offering to transfer the business licensed hereunder to Muzak, at the price and
on the other terms which Master Affiliate (or its owners, as the case may be)
would be willing to accept from a third party (as determined by the terms of a
bona fide offer by such third party). Master Affiliate shall notify Muzak of
- ---- ----
such terms (the "Offer") and if within 30 days after Muzak's receipt of the
Offer, Muzak has not accepted such Offer, Master Affiliate (or its owners, as
the case may be) may transfer the business licensed hereunder to the third-party
offeree, but only on the price and other terms stated in the Offer. In the event
Master Affiliate (or its owners, as the case may be) fail to effect such a
transfer on such terms within ninety (90) days of Muzak's receipt of the Offer,
Master Affiliate (or its owners, as the case may be) shall be required to once
again make the Offer to Muzak and the procedure and timetable detailed in this
Section 11.3 (including the requirement to once again make the Offer after the
ninety day period described above) shall commence anew. Notwithstanding the
foregoing, (i) Master Affiliate and its owners shall not transfer the business
licensed hereunder to any third party purchaser without the prior written
consent of Muzak, which consent shall
35
<PAGE>
not be unreasonably withheld; and (ii) Muzak shall not exercise its rights of
first refusal with respect to any stock transfer by an owner of Master Affiliate
as shown in Section 11.2 to such owner's parent, spouse, or child.
12. DEFAULT AND TERMINATION
-----------------------
12.1 Automatic. A Party shall be deemed to be in default under this
---------
Agreement, and all rights granted herein shall automatically terminate without
notice to that Party, if that Party shall become insolvent or makes a general
assignment for the benefit of creditors; or if a petition in bankruptcy is filed
by that Party or such a petition is filed against and not opposed by that Party;
or if that Party is adjudicated as bankrupt or insolvent; or if a bill in equity
or other proceeding for the appointment of a receiver of that Party or other
custodian for that Party's business or assets is filed and consented to or not
opposed by that Party; or if a receiver or other custodian (permanent or
temporary) of that Party's assets or property, or any part thereof, is appointed
by any court of competent jurisdiction; or if proceedings for a composition or
arrangement with creditors should be instituted by or against that Party; or if
a final judgment affecting a material portion of that Party's assets remains
unsatisfied or of record or unsecured by payment into court for thirty (30) days
or longer; or if that Party is wound up, liquidated or dissolved; or if
execution is levied against a material portion of that Party's business or
property; or if the real or personal property of that Party used in
36
<PAGE>
connection with the business contemplated by this Agreement shall be foreclosed
or sold after levy thereupon.
12.2 Non-Curable. A Party shall be deemed to be in default and the other
-----------
Party may, at its option, terminate this Agreement, without affording the
defaulting Party any opportunity to cure the default, effective immediately upon
receipt of written notice by the defaulting Party, upon the occurrence of any of
the following events:
12.2.1 If a Party at any time ceases to operate or otherwise
abandons the business contemplated by this Agreement.
12.2.2 If a principal of a Party is convicted of an indictable
criminal offense, a crime involving moral turpitude, fraud, or any other crime
or offense that the other Party reasonably believes is likely to have an adverse
effect on the benefits to be derived by such other Party hereunder.
12.2.3 If, contrary to the terms of Article 14 hereof, a Party
discloses or divulges Confidential Information provided by the other Party, and
the other Party is damaged thereby.
12.2.4 If any representation made by a Party herein is found to be
untrue when and as made and the other Party has been damaged thereby.
12.2.5 If a Party knowingly maintains false books or records or
submits any false reports to the other Party.
12.2.6 If a Party repeatedly is in default under Section 12.3 hereof
for failure substantially to comply with any
37
<PAGE>
of the requirements imposed by this Agreement, whether or not cured after
notice.
12.3 Curable. Except as provided in Sections 12.1 and 12.2 of this
-------
Agreement, a Party shall have thirty (30) days after its receipt from the other
Party of a written notice of termination within which to remedy any default
hereunder (or, if the default cannot reasonably be cured within such thirty (30)
days, to initiate within that time substantial and continuing action to cure the
default) and to provide evidence thereof. If any such default is not cured
within that time (or, if appropriate, substantial and continuing action to cure
the default is not initiated within that time), or such longer period as
applicable law may require, this Agreement shall terminate without further
notice to the defaulting Party effective immediately upon expiration of the
thirty (30) day period or such longer period as applicable law may require. A
Party shall be in default hereunder for any failure to comply substantially with
any of the requirements imposed by this Agreement or to carry out the terms of
this Agreement in good faith. Such defaults shall include, without limitation,
the occurrence of any of the following events:
12.3.1 If a Party at any time loses the right to do or transact the
business licensed hereunder in the Licensed Area.
12.3.2 If a Party fails, refuses, or neglects promptly to pay when
due any monies owing to the other Party or to submit the financial or other
information required hereunder.
38
<PAGE>
12.3.3 If a Party fails, refuses or neglects to reasonably comply
with the standards or procedures prescribed herein.
12.3.4 If a Party fails, refuses, or neglects to obtain the other
Party's prior written approval or consent as required by this Agreement.
12.3.5 If Master Affiliate engages in any business or markets any
service or product under a name or mark which is confusingly similar to the
Proprietary Marks.
12.3.6 If a Party, by act or omission, permits a continued violation
in connection with the operation of the business licensed hereunder of any law,
ordinance, rule, or regulation of a governmental body or agency in Mexico, in
the absence of a good faith dispute over its application or legality and without
promptly resorting to an appropriate administrative or judicial forum for relief
therefrom.
12.4 Force Majeure. Neither Muzak nor Master Affiliate shall have any
-------------
liability to the other as a result of the failure of such Party to perform its
obligations hereunder, nor shall such failure be considered a breach of this
Agreement, if such failure is due to fire, flood, other act of God or the
elements, strike or other event or situation beyond the control of such Party
acting in accordance with sound business practices; provided, however, that the
foregoing shall not limit Muzak's rights as provided in Section 4.4.
13. OBLIGATIONS UPON TERMINATION OR EXPIRATION
------------------------------------------
Upon termination or expiration of this Agreement:
39
<PAGE>
(a) Master Affiliate shall cease distributing the Services, cease
using the Proprietary Marks for any purposes whatsoever, and not thereafter,
directly or indirectly, represent itself to the public or hold itself out as a
licensee of Muzak.
(b) Master Affiliate shall immediately pay all sums indisputably
owing to Muzak under this Agreement, including payment of royalty fees and other
charges for the period from the date covered by its last payment to the date of
termination, and Muzak shall promptly pay all sums indisputably owing to Master
Affiliate.
(c) Master Affiliate shall forthwith assign to Muzak and Muzak shall
assume all of Master Affiliate's rights, title, and interest and obligations in
and to the Affiliate Agreements entered into between Master Affiliate and the
Affiliates. For a 2-year period following such assignment, Master Affiliate
shall remain liable and shall indemnify Muzak and its successors and assigns for
any and all claims, demands, actions, causes of action, suits, proceedings,
damages, losses, liabilities, charges, fines, penalties, costs and expenses
(including, without limitation, attorneys' fees and court costs) ("Claims")
relating to or arising from performance of (or failure to perform) the
obligations of Master Affiliate under the Affiliate Agreements prior to the date
of such assignment.
(d) In the event of a termination of this Agreement, Master
Affiliate shall sell to Muzak all of its rights in all National Account
Subscriber Contracts described in Section 7.1.5 (except those that do not refer
to MUZAK(R) Services, as provided
40
<PAGE>
in Section 7.1.5), and all related equipment, with such sale to be for the
price(s) described below. Upon such sale, Muzak shall assume all of Master
Affiliate's obligations relative to performance of such Contracts and with
respect to such related equipment accruing after the date of transfer. In the
event that this Agreement has expired without renewal or is otherwise terminated
in connection with the bona fide, arm's length purchase of the Master
Affiliate's subscriber contracts for a price based on a multiple of Recurring
Music Gross Billings (as hereinafter defined), Muzak's purchase price hereunder
shall be determined by multiplying such arm's length multiple times the
Recurring Music Gross Billings attributable to the Subscriber Premises of the
National Account serviced by Master Affiliate (and not an Affiliate). If,
however, no such arm's length multiple can be fairly or accurately determined
under the circumstances, Muzak's purchase price hereunder shall be the result of
multiplying the Prevailing Music Multiple (as hereinafter defined) times the
Recurring Music Gross Billings attributable to such Subscriber Premises. As used
herein, (i) the term "Recurring Music Gross Billings" means the average
recurring monthly billings to a Subscriber for the Music Services and related
equipment, net of sales taxes (per each Subscriber Premises), and (ii) the term
"Prevailing Music Multiple" means the average of the arm's length multiples used
to determine the purchase prices of the three most recently reported (to Muzak)
sales of the businesses of Muzak licensees, to the extent such prices were based
on arm's length multiples of Recurring Music
41
<PAGE>
Gross Billings and such multiples can be independently verified as such.
Notwithstanding the foregoing, in the event that (i) prior to the date of
Muzak's purchase of the Master Affiliate's rights under a National Account
Subscriber Contract, Master Affiliate and/or Muzak have received formal notice
that such National Account Subscriber Contract will expire or be terminated
(without renewal) for reasons unrelated to the transfer thereof to Muzak, and
(ii) the number of calendar months remaining between the date of such purchase
by Muzak and the date of such expiration or termination of the Contract is less
than the above-described arm's length multiple or Prevailing Music Multiple (as
the case may be), then the purchase price of Master Affiliate's rights in such
Contract shall be determined by multiplying such remaining number of months in
the Contract term by the Recurring Music Gross Billings attributable to such
Contract.
14. COVENANTS
---------
14.1 No Other Services. During the term of this Agreement, except as
-----------------
otherwise approved in writing by Muzak, neither Master Affiliate nor any of the
persons or entities holding (either directly, indirectly, or beneficially) a
controlling ownership interest in Master Affiliate shall, either directly or
indirectly, for itself, or through, on behalf of, or in conjunction with any
person or entity:
14.1.1 Participate or permit any of its employees, officers, or
directors to participate, either directly or indirectly in the distribution in
the Licensed Area of any communications service substantially the same as or
similar to
42
<PAGE>
the Adjunct Services (except a communications service distributed by any such
person or entity pursuant to a contract or agreement in effect on the date the
Adjunct Service which is the same as or similar to such communications service
is first offered to Master Affiliate by Muzak), or any subscription music
service other than the Music Services, including, without limitation, a radio
program service which is provided through special reception devices tuned only
to that station's signal and any music programming that is provided to
commercial or residential locations by means of cable television or cable radio;
provided, however, that the foregoing shall not become effective with respect to
- -------- -------
such other subscription music services that are distributed by on-premise
Recorded Media until the time specified in Section 3.3.2; and provided further,
-------- -------
that Master Affiliate may provide, by means of cable radio (including where
delivery of the music to the cable radio subscriber is not by hard wire), music
programming to residential locations that are not used for commercial purposes;
and provided further, that if, as a result of Master Affiliate's acquisition of
-------- -------
another music business or the assets thereof during the term of this Agreement,
Master Affiliate becomes the assignee of a customer agreement for such other
music or communications services or an agreement under which Master Affiliate is
the distributor of such other music or communications services and Master
Affiliate cannot substitute the Services for such other services without causing
a breach of such agreement, Master Affiliate may provide such other services to
the customer receiving such services on the date of assignment
43
<PAGE>
through the remaining term (without reference to renewal rights) of such
agreement; and provided further, that Master Affiliate may distribute Mexican-
-------- -------
produced programs of Mexican music provided that such programs do not violate or
cause a violation of Section 5.3 hereof. Indirect participation shall include
participation as an officer, director, owner (which term shall not include the
holder of 5% or less of the common stock of a publicly-held entity), partner,
employee, or consultant of an entity distributing such other communications or
subscription music service.
14.1.2 Divert or permit any of its employees, officers, or directors
to divert any existing or prospective Subscriber to any competitor in the
Licensed Area, by direct or indirect inducement or otherwise, or do or perform,
directly or indirectly, any other act injurious or prejudicial to the goodwill
associated with Muzak, the Proprietary Marks, or the Services.
14.1.3 Display in any location in the Licensed Area any trade names,
trademarks, or service marks of any other business providing subscription music
services or providing communications services substantially similar to the
Adjunct Services except if permitted to sell or distribute such services in the
Licensed Area pursuant to Section 14.1.1 above.
14.2 Confidentiality. During the term of this Agreement and thereafter,
---------------
neither Muzak nor Master Affiliate (including any persons or entities listed on
the last page of this Agreement) shall use for its own purposes or divulge to
any third party any
44
<PAGE>
trade secrets or confidential information of the other. As used herein (i) the
term "third party" shall not include any party otherwise lawfully in receipt of
the trade secrets or confidential information to be divulged; or any employee or
consultant of Muzak or Master Affiliate, as the case may be, provided that such
individual agrees not to further use or disclose such trade secrets or
confidential information; or any person or entity providing credit or financing
to Muzak or Master Affiliate, as the case may be, provided such person or entity
(and any representative thereof) is similarly charged with maintaining the
confidence of such trade secrets and confidential information; or any
representative of a governmental authority or other person or entity to whom
disclosure is required by compulsion of law, provided notice of the demand for
such disclosure is given, within 48 hours of receipt of such demand, to the
party owning the confidential information or trade secrets required to be
disclosed; and (ii) the term "confidential information" means information
designated as such in writing by the party owning such information, as well as
customer lists and revenue data (without further designation), but does not
include information that has become part of the public domain through
publication or other similar communication. During the term of this Agreement
Muzak shall not require that Master Affiliate disclose to Muzak the name and
address of any Subscriber other than (i) for the purpose of participation in the
National Accounts Program, or (ii) to permit delivery of the Services by such
technological means as require such information for such
45
<PAGE>
delivery. Master Affiliate understands and agrees that if Muzak is unable to
perform any of its obligations hereunder as a result of its inability to obtain
such Subscriber information, such nonperformance shall not be deemed a breach of
this Agreement.
14.3 Covenants Independent. The parties agree that the foregoing
---------------------
covenants shall be construed as independent of any other covenant or provision
of this Agreement. If all or any portion of a covenant in this Article 14 is
held unreasonable or unenforceable by a court or agency having valid
jurisdiction in an unappealed final decision, each Party expressly agrees to be
bound by any lesser covenant subsumed within the terms of such covenant that
imposes the maximum duty permitted by law, as if the resulting covenant were
separately stated in and made a part of this Article 14.
14.4 Irreparable Injury. Each Party acknowledges that its violation of
------------------
the terms of this Article 14 will result in irreparable injury to the other
Party for which no adequate remedy at law may be available, and accordingly
agrees that the other Party may seek to obtain the issuance of an injunction
prohibiting any conduct by such Party in violation of the terms of this Article
14.
15. FEES, TAXES AND PERMITS
-----------------------
15.1 Taxes. Any and all governmental charges relating to or arising out
-----
of this Agreement, or any amendment hereto, in the form of registration fees,
surtax, stamp duties, or other governmental rates, taxes (other than income
taxes), or charges of any nature whatsoever shall be paid (1) by Master
Affiliate
46
<PAGE>
when such charges are due under any national or local law of Mexico and (2) by
Muzak when such charges are due under any federal, state or local law of the
United States of America. Any income taxes which are the debt of Muzak under any
national or local law of Mexico on any fees paid to it by Master Affiliate under
this Agreement shall be withheld by Master Affiliate to the extent required by
law, and Master Affiliate shall provide proof to Muzak of its withholding and
payment of any such taxes.
15.2 Comply with Laws. Master Affiliate shall comply with all laws,
----------------
rules, and regulations, and shall timely obtain any and all permits,
certificates, and licenses necessary in the reasonable judgment of Master
Affiliate for the full and proper conduct of the business licensed under this
Agreement in the Licensed Area.
15.3 Notice of Suit. Master Affiliate shall notify Muzak in writing
--------------
within five (5) days of its discovery of any action, suit, or proceeding, and of
the issuance of any order, writ, injunction, award, or decree of any court,
agency, or other governmental instrumentality, which is likely to adversely
affect the operation or financial condition of the business contemplated by this
Agreement.
16. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
------------------------------------------
16.1 No Fiduciary Relationship. It is understood and agreed by the
-------------------------
Parties hereto that this Agreement does not create a fiduciary relationship
between them.
16.2 Representations By the Parties. Each party represents that its
------------------------------
execution of this Agreement will not
47
<PAGE>
constitute a breach of any existing contractual obligations of such party.
16.3 Independent Contractor. Muzak and Master Affiliate are independent
----------------------
contractors vis-a-vis each other and neither Party, nor their respective
employees and agents, are or are to be construed to be either legal or implied
agents, servants or employees of the other Party or to have authority to act for
or on behalf of the other Party. No acts taken or assistance given by one Party
to the other pursuant to this Agreement will be construed to alter this
relationship. Nothing in this Agreement shall authorize one Party to make any
contract, agreement, warranty or representation on behalf of the other Party or
to incur any debt or obligation in the other Party's name, and the other Party
shall in no event assume liability for, or be deemed liable hereunder as result
of, any such action. Without limiting the rights of a Party to enforce its
rights hereunder, a Party shall not be liable to a third Party by reason of any
action or omission of the other Party in the conduct of its business.
17. APPROVALS AND WAIVERS
---------------------
17.1 Request for Approval. Whenever this Agreement requires the prior
--------------------
approval or consent of the other Party, such Party shall make a timely written
request to the other Party, and such approval or consent shall be obtained in
writing.
17.2 No Implied Waivers. Except with respect to those modifications which
------------------
this Agreement provides may be made unilaterally by Muzak, this Agreement shall
not be modified, amended, rescinded, cancelled or waived in whole or in part,
48
<PAGE>
except by written instrument signed by the Parties and no waiver of any of the
provisions of this Agreement shall constitute a waiver of any of the other
provisions hereof (whether or not similar) nor shall any waiver constitute a
continuing waiver unless expressly so provided therein.
18. NOTICES
-------
Any notice required or permitted to be given hereunder shall be considered
given if written, delivered in person, and acknowledged by the receiving Party,
or if sent by registered, prepaid mail or overnight service (such as Federal
Express) addressed to the address below or such other address as the addressee
may have given to that other Party from time to time:
if to Muzak:
MUZAK LIMITED PARTNERSHIP
400 North 34th Street
Suite 200
Seattle, WA 98103
Attn: President
if to Master Affiliate:
AUDIOPLAN, S.A.
Ave. Periferico Sur # 3449
1er Piso
San Jeronimo Lidice
Mexico 20, D.F. Mexico
Attn: Arturo Zorilla Martinez
Any notice delivered to the Party to whom it is addressed as provided herein
shall be deemed to have been given and received on the day it is so delivered at
such address, provided that if such day is not a Business Day, then the notice
shall be deemed to have been given and received on the next Business Day.
49
<PAGE>
Business Day means any day other than a Saturday, Sunday or statutory or civic
holiday in the place of delivery.
19. ENTIRE AGREEMENT
----------------
This Agreement, including all exhibits hereto, together with the agreements
and other documents to be delivered pursuant hereto, constitute the entire
agreement between the Parties pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties.
20. SEVERABILITY AND CONSTRUCTION
-----------------------------
20.1 Severability. If, for any reason, any portion, section, part, term,
------------
and/or provision herein is determined to be invalid and contrary to, or in
conflict with, any existing or future law or regulation by a court or agency
having valid jurisdiction, such shall not impair the operation of, or have any
other effect upon, such other portions, sections, parts, terms, and/or
provisions of this Agreement as may remain otherwise intelligible; and the
latter shall continue to be given full force and effect and bind the Parties
hereto; and said invalid portions, sections, parts, terms, and/or provisions
shall be deemed not to be a part of this Agreement; provided, however, that in
the event that such determination and severance of such portion, section, part,
term and/or provision hereof frustrates in whole or in substantial part the
intent and purpose of this Agreement, this Agreement shall terminate.
20.2 No Implied Rights. Except as expressly provided to the contrary
-----------------
herein, nothing in this Agreement is intended, nor
50
<PAGE>
shall be deemed, to confer upon any person or legal entity other than the
Parties and their respective officers, directors, and employees any rights or
remedies under or by reason of this Agreement.
21. MISCELLANEOUS
-------------
21.1 Arbitration. Subject to Section 21.3, all disputes arising in
-----------
connection with this Agreement shall be settled under the Commercial Arbitration
Rules of the American Arbitration Association as presently in force, by one
arbitrator appointed by the American Arbitration Association in accordance with
said Rules. The place of arbitration shall be Mexico City, Mexico, and the law
applicable to the arbitration procedure shall be determined by referring to the
law of the place of arbitration. The arbitrator shall determine the matters in
dispute in accordance with the laws of Mexico, which laws shall prevail in the
event of any conflict of laws. The Spanish language shall be used throughout the
arbitral proceedings. Master Affiliate and Muzak agree that the award of the
arbitrator shall be the sole and exclusive remedy between them regarding any
claims, counterclaims, issues, or accounting presented or pled to the
arbitrator; that it shall be made and shall promptly be payable in U.S. Dollars
free of any tax, deduction or offset; and that any costs, fees, or taxes
incident to enforcing the award shall, to the maximum extent permitted by law,
be charged against the party resisting such enforcement. The award shall include
interest from the date of any damages incurred for breach or other violation of
this Agreement, and from the date of the award
51
<PAGE>
until paid in full, at a rate to be fixed by the arbitrator, but in no event
less than the London Interbank Offering Rate per annum quoted for the
corresponding period in the London Interbank Market for United States Dollars
for immediately available funds, as reported in the Wall Street Journal.
---- ------ -------
21.2 Survival. It is agreed that all covenants and agreements to be
--------
performed and/or observed by Master Affiliate after the expiration or
termination of this Agreement shall remain in force and effect after the
termination of this Agreement to the extent necessary to give such covenants
their full force and effect.
21.3 Injunctive Relief. Nothing herein contained shall bar a party's
-----------------
right to seek to obtain injunctive relief against threatened conduct that will
cause it loss or damages, under the usual equity rules, including the applicable
rules for obtaining restraining orders and preliminary injunctions.
21.4 Legal Fees. If any action or proceeding is brought for the
----------
enforcement of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable legal fees and other costs incurred in
the action or proceeding, in addition to any other relief to which it or they
may be entitled.
21.5 Language. The official text of this Agreement is the English
--------
language text. Muzak and Master Affiliate agree that all writings and notices
hereto shall be prepared and executed in the English language.
52
<PAGE>
22. ACKNOWLEDGEMENTS
----------------
Master Affiliate acknowledges that it has conducted an independent
investigation and has had the opportunity to receive legal advice from counsel
of its own choosing and recognizes that the business venture contemplated by
this Agreement involves business risks and that its success will be largely
dependent upon the ability of Master Affiliate as an independent person or
entity. Muzak expressly disclaims the making of, and Master Affiliate
acknowledges that it has not received, any warranty or guarantee, express or
implied, as to the potential volume, profits, or success of the business venture
contemplated by this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and
delivered this Agreement on the day and year first above written.
MUZAK LIMITED PARTNERSHIP,
a Delaware limited partnership
By: /s/ John R. Jester
--------------------------------
Title: President
----------------------------
53
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
I certify that I know or have satisfactory evidence that John Jester
-----------,
is the person who appeared before me, and said person acknowledged that he
--
signed this instrument, on oath stated that he was authorized to execute the
--
instrument and acknowledged it as the President of MUZAK LIMITED PARTNERSHIP,
---------
to be the free and voluntary act and deed of such party, for the uses and
purposes therein mentioned.
Given under my hand and official seal this 21st day of February, 1992.
---- -------- -
[SIGNATURE ILLEGIBLE]
----------------------------------------
NOTARY PUBLIC in and for the State
of New York, residing at
243 E 4th St. Bklyn NY 11268
----------------------------------------
My appointment expires 9/30/93
-----------------
Commission # 24 4687728
Qualified in Kings County
54
<PAGE>
MASTER AFFILIATE
AUDIOPLAN, S.A.,
a Mexican corporation
By: [SIGNATURE ILLEGIBLE]
------------------------------------
Title: PRESIDENT
---------------------------------
State of New York )
- ----------------------------
) ss.
County of New York )
- ----------------------------
I certify that I know or have satisfactory evidence that Arturo Zorilla M.,
-----------------
is the who appeared before me, and said person acknowledged that he signed this
--
instrument, on oath stated that he authorized to execute the instrument and
--
acknowledged it as the President of AUDIOPLAN, S.A., to be the free and
---------
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned.
Given under my hand and official seal this 21st day of February, 1992.
---- -------- -
[SIGNATURE ILLEGIBLE]
----------------------------------------
NOTARY PUBLIC in and for the State
of New York, residing at
243 E. 4th St. Bklyn NY 11268
----------------------------------------
My appointment expires 9/30/93
-----------------
Commission # 24 4687728
Qualified in Kings County
55
<PAGE>
Each of the undersigned (i) owns the interest in Master Affiliate set forth
in Article 11; (ii) has read this Agreement; and (iii) agrees to be bound by
those provisions of this Agreement that impose obligations on the owners of
stock in Master Affiliate. Without limiting the foregoing, the undersigned
understand and agree that the cumulative transfer of 50% or more of the stock of
Master Affiliate will be deemed to be a transfer of the business licensed under
this Agreement, with the result that Muzak will have certain rights, as set
forth in Article 11 and the undersigned agree to comply, and to cause Master
Affiliate to comply, with Article 11.
_____________________________________
(Typed Name)
- -------------------------------------
Date: ______________________________
Address: ___________________________
___________________________
_____________________________________
(Typed Name)
- -------------------------------------
Date: ______________________________
Address: ___________________________
___________________________
_____________________________________
(Typed Name)
- -------------------------------------
Date: ______________________________
Address: ___________________________
___________________________
_____________________________________
(Typed Name)
- -------------------------------------
Date: ______________________________
Address: ___________________________
___________________________
<PAGE>
Exhibit 10.15
<PAGE>
AMENDMENT TO
MUZAK MASTER AFFILIATE AGREEMENT
(CANADA)
This AMENDMENT TO MUZAK MASTER AFFILIATE AGREEMENT (CANADA) (the
"Amendment") is made and entered into as of the 1st day of September, 1991, by
and between MUZAK LIMITED PARTNERSHIP, a Delaware limited partnership ("Muzak"),
and CHUM LIMITED, an Ontario corporation ("Master Affiliate"). The parties
agree as follows:
1. Recitals.
--------
On August 30, 1990, the parties entered into a Master Affiliate
Agreement (the "Agreement") pursuant to which Muzak granted to Master Affiliate
an exclusive license (subject to the rights of existing Muzak affiliates under
existing contracts, as described in the Agreement) to engage in Canada in the
business of providing to customers in Canada subscription music services and
adjunct services, as amended by letters and memoranda between MUZAK and Master
Affiliate, dated August 30, 1990, April 1, 1991, April 2, 1991, May 6, 1991 and
May 13, 1991 (collectively, the "Letter Amendments"). The parties wish to
further amend the Agreement in the manner set forth below in this Amendment. All
capitalized terms used herein shall have the meanings set forth below in the
Agreement unless otherwise defined herein.
2. Amendment of Section 4.
----------------------
(a) Section 4.1.1 of the Agreement shall be amended to read in its entirety as
follows:
"4.1.1 Gross Billings of Master Affiliate:
----------------------------------
(a) For the period from September 1, 1991 through August 31, 1993, Master
Affiliate shall pay to Muzak a monthly royalty fee in the amount of
Sixteen Thousand Six Hundred and Ninety Two Dollars and Fifty Cents
Canadian (CDN $16,692.50).
(b) For the period from September 1, 1993 through August 31, 1994, Master
Affiliate shall pay to Muzak a monthly royalty fee in an amount equal
to six percent (6%) of the product of the number of Master Affiliate's
Subscribers for Music Services (except those provided over Muzak's DBS
system) as of September 1, 1993 and the amount of the Average Monthly
Gross Billings of Master Affiliate as of September 1, 1993.
<PAGE>
-2-
(c) For each successive 12 month period beginning on September 1, 1994
until the expiration or earlier termination of this Agreement, Master
Affiliate shall pay to Muzak a monthly royalty fee in an amount equal
to seven percent (7%) of the product of the number of Master
Affiliate's Subscribers for Music Services (except those provided over
Muzak's DBS system) as of September 1 of each such successive 12 month
period and the Average Monthly Gross Billings of Master Affiliate as
of September 1 of each such successive twelve month period.
(d) The provisions of this Section 4.1.1 shall be subject to Muzak's right
to conduct an annual audit pursuant to Section 9.3.
(e) For the purposes of this Section 4.1, "Average Monthly Gross Billings"
for any particular person at any particular September 1 shall mean the
amount that is obtained when the aggregate of all Gross Billings of
such person referable to the month of September in which such date
falls is divided by the number of Subscribers of such person for Music
Services (except those provided over Muzak's DBS system) at such
date."
(b) Section 4.1.2 of the Agreement shall be amended to read in its entirety as
follows:
"4.1.2 Gross Billings of Affiliates: Master Affiliate shall collect, on a
----------------------------
monthly basis, a percentage of Affiliates' Gross Billings in royalty fees.
The percentage of Gross Billings collected by Master Affiliate as royalty
fees shall be determined in the sole discretion of Master Affiliate,
provided that Master Affiliate shall pay to Muzak, on a monthly basis, and
with respect to each Affiliate, an amount (the "Minimum Amount") equal to
seven percent (7%) of the product of the Average Monthly Gross Billings of
each such Affiliate as of September 1 of each successive 12 month period
and the number of such Affiliate's subscribers as of September 1 of each
successive 12 month period. In addition, Master Affiliate shall pay to
Muzak, on a monthly basis, one-half (1/2) of all royalty fees collected by
Master Affiliate from Affiliates and calculated by reference to average
Gross Billings in excess of the aggregate of all Minimum Amounts of all
such Affiliates. The provisions of this Section 4.1.2 shall be subject to
Muzak's right to conduct an annual audit pursuant to Section 9.3 hereof,
and to the audit provisions of Section 10.3 of the Affiliate Agreement
attached hereto as Exhibit G."
<PAGE>
-3-
(c) Section 4.2 of the Agreement shall be amended by the addition of the
following at the end of said Section 4.2:
"Notwithstanding the foregoing, the charge to Master Affiliate for
Adparting delivered over Muzak's DBS system to a Subscriber shall be five
dollars ($5.00) per thirty-second spot, and the charge to Master Affiliate
for Adparting delivered over Muzak's DBS system to a turnaround point for
rebroadcast over a Canadian satellite (only to be used in the event that
Muzak is unable to deliver such services directly to a Subscriber over its
DBS system) shall be three dollars ($3.00) per thirty-second spot."
(d) Section 4.6 of the Agreement shall be amended by deleting the second
sentence thereof and substituting the following:
"All monthly payments required by Section 4.1 shall be paid by the last day
of each month in respect of the amount due for the preceding calender month
and shall be submitted to Muzak together with any reports or statements
required under Article 9 hereof."
(e) Section 4.7 of the Agreement shall be amended by inserting therein after
the references to "DBS Music Service" the following phrase:
"over Muzak's DBS system (except for delivery to studio locations)."
(f) Section 4.8.1 of the Agreement shall be amended by inserting therein in the
parenthetical phrases "(except those provided via DBS)" after the word "DBS" the
following phrase:
"over Muzak's DBS system."
3. Amendment of Exhibit G (the Affiliate Agreement).
------------------------------------------------
(a) Section 21.1 of Exhibit G shall be amended to read in its entirety as
follows:
"21.1 Choice of Law and Choice of Forum.
---------------------------------
This Agreement shall be interpreted and construed under the laws of the
Province of Ontario; except to the extent that any matter in question
involves the operation of this Agreement in the Province of Alberta, in
which event the laws of the Province of Alberta shall prevail in the event
of any conflict of law. The parties hereto hereby attorn and irrevocably
submit to the non-exclusive jurisdiction of the courts of the Province of
Ontario in any action or proceeding relating to or arising out of this
Agreement; provided, however, that in the event that in the event that any
action to be brought pursuant to this Agreement by one party hereto against
the other involves the
<PAGE>
-4-
operation of this Agreement in the Province of Alberta, Canada, the parties
hereto hereby agree that such action will be brought in a court of
competent jurisdiction in the Province of Alberta."
4. Effect on Agreement. Except as specifically amended herein, the
-------------------
Agreement as amended by the Letter Agreements shall remain in full force and
effect and is hereby ratified and confirmed as so amended.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
MUZAK LIMITED PARTNERSHIP CHUM LIMITED
By: [SIGNATURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
----------------------------------- -----------------------------
Title: Vice President Title:
Affiliate Sales & Development
<PAGE>
[LETTERHEAD OF MUZAK APPEARS HERE]
August 30, 1990
--
CHUM Limited
1331 Yonge Street
Toronto, Ontario
CANADA M4T 1Y1
Gentlemen:
Reference is made to that certain Master Affiliate Agreement between CHUM
Limited ("Master Affiliate") and Muzak Limited Partnership ("Muzak") dated
August 30, 1990 (the "Agreement"). All capitalized terms used herein shall have
--
the meaning set forth in the Agreement unless otherwise defined herein.
Notwithstanding anything to the contrary in the Agreement, and without
limiting any rights of any Existing Affiliate in the Province of Alberta
pursuant to an Existing Contract, Master Affiliate and Muzak hereby agree that
Muzak shall retain all rights relating to the marketing, distribution, and sale
of the Services and use of the Proprietary Marks in, and the Licensed Area shall
exclude any part of, the Province of Alberta, Canada unless and until Muzak and
Master Affiliate have both fully complied with all applicable franchise
registration laws in the Province of Alberta. Master Affiliate and Muzak hereby
further agree to use their respective reasonable best efforts to promptly obtain
such approvals under said registration laws as are required in order for the
Agreement to apply to the Province of Alberta.
Kindly acknowledge that the foregoing represents our mutual agreement by
signing where indicated below.
Very truly yours,
MUZAK LIMITED PARTNERSHIP
By: Field/Muzak, Inc.,
Its General Partner
By: /s/ John R. Jester
------------------------------
Title: President
---------------------------
Acknowledged and Agreed to:
CHUM LIMITED
By: [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
------------------------
<PAGE>
MUZAK(R) MASTER AFFILIATE AGREEMENT
(CANADA)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS.................................................................... 1
1. GRANT.................................................................. 3
2. TERM AND RENEWAL....................................................... 7
3. DUTIES OF MUZAK........................................................ 8
4. FEES................................................................... 14
5. DUTIES OF MASTER AFFILIATE............................................. 21
6. PROPRIETARY MARKS...................................................... 28
7. NATIONAL ACCOUNTS PROGRAM.............................................. 34
8. MARKETING AND PROMOTION................................................ 36
9. ACCOUNTING AND RECORDS................................................. 36
10. INSURANCE.............................................................. 38
11. TRANSFER OF INTEREST................................................... 39
12. DEFAULT AND TERMINATION................................................ 39
13. OBLIGATIONS UPON TERMINATION OR EXPIRATION............................. 44
14. MASTER AFFILIATE'S CONTRACTUAL OBLIGATIONS............................. 45
15. FEES, TAXES, AND PERMITS............................................... 50
16. INDEPENDENT CONTRACTOR AND INDEMNIFICATION............................. 52
17. APPROVALS AND WAIVERS.................................................. 53
18. NOTICES................................................................ 53
19. ENTIRE AGREEMENT....................................................... 55
20. SEVERABILITY AND CONSTRUCTION.......................................... 55
21. MISCELLANEOUS.......................................................... 56
22. ACKNOWLEDGMENTS........................................................ 58
</TABLE>
i
<PAGE>
EXHIBITS
- --------
EXHIBIT A - Music Services
EXHIBIT B - Adjunct Services
EXHIBIT C - Proprietary Marks
EXHIBIT D - List of Existing Affiliates, Showing Territories
and Accounts Outside of Territories
EXHIBIT E - Technical Specifications -- Satellite
EXHIBIT F - Service Delivery Equipment Specifications
EXHIBIT G - Affiliate Agreement
ii
<PAGE>
MUZAK(R)
MASTER AFFILIATE AGREEMENT
(CANADA)
This agreement ("Agreement") is made and entered into this 30th day of
August, 1990, by and between MUZAK LIMITED PARTNERSHIP, a Delaware limited
partnership ("Muzak"), and CHUM LIMITED, an Ontario corporation ("Master
Affiliate") (collectively the "Parties").
RECITALS
WHEREAS, Muzak, as the result of the expenditure of time, skill, effort,
and money, has developed and owns a distinctive music distribution system (the
"Distribution System") for the marketing and delivery of subscription music
services, adjunct communications services, and related equipment;
WHEREAS, the distinguishing characteristics of the Distribution System
include, without limitation, distinctive subscription music services, each of
which is characterized by distinctive program content composed of selections
from specific music formats and designed and developed using proprietary
program-scheduling techniques which are set forth in Exhibit A (the "Music
Services"); unique adjunct services relating to the delivery of advertising,
data, and video communications, which are set forth in Exhibit B (the "Adjunct
Services"); special distribution methods and procedures for both the Music
Services and the Adjunct Services (jointly, the "Services"); standards,
specifications, and procedures for operations; and procedures for quality
control; all of which may be changed, improved, and
1
<PAGE>
further developed by Muzak from time to time in accordance with the terms
hereof;
WHEREAS, the Services are distributed to customers who execute written
agreements (the "Subscriber Contracts") providing for receipt of the Services at
certain locations (the "Subscriber Premises");
WHEREAS, Muzak identifies the Distribution System and the Services marketed
thereunder by means of certain trade names, service marks, trademarks, logos,
emblems, and indicia of origin, including but not limited to the mark "MUZAK(R)"
and such other trade names, service marks, and trademarks as are now designated
in Exhibit C (and may hereafter be designated by Muzak in writing pursuant to
Section 6.6 hereof) for use in connection with the Distribution System (the
"Proprietary Marks");
WHEREAS, Muzak continues to develop, use, and control the use of such
Proprietary Marks in order to identify for the public the source of the Services
and products marketed under the Distribution System, and to represent the
Distribution System's high standards of quality and service;
WHEREAS, Master Affiliate understands and acknowledges the importance of
Muzak's high standards of quality and service and the necessity of operating the
business contemplated by this Agreement in conformity with Muzak's standards and
specifications;
WHEREAS, Master Affiliate understands and acknowledges that Muzak has
granted to a number of entities, as set out in Exhibit D (the "Existing
Affiliates"), the right to operate under
2
<PAGE>
the Distribution System in specified territories in Canada, as further set out
in Exhibit D (the "Existing Affiliate Territories") and has also granted to the
Existing Affiliates certain other accounts outside of the Existing Affiliate
Territories, which accounts are also set out in Exhibit D; and
WHEREAS, Master Affiliate desires to obtain certain exclusive rights to
develop the Distribution System in Canada and to grant others the right to
operate under the Distribution System in Canada subject to the terms and
conditions of this Agreement;
NOW, THEREFORE, the Parties, in consideration of the undertakings and
commitments of each Party to the other Party set forth herein, hereby agree as
follows:
1. GRANT
-----
1.1 Rights Granted: Muzak hereby exclusively grants to Master Affiliate,
--------------
subject to the rights of the Existing Affiliates under their existing contracts
with Muzak (the "Existing Contracts"), and upon the terms and conditions herein
contained:
1.1.1 The right and license to engage in Canada in the business of
providing to customers in Canada ("Subscribers"), pursuant to Subscriber
Contracts executed by Master Affiliate and such Subscriber, by such delivery
methods as shall be reasonably approved from time to time by Muzak, the Services
and such other music and communications services as Muzak may authorize in
writing from time to time, and to use the Proprietary Marks in connection
therewith.
3
<PAGE>
1.1.2 The right to license others ("Affiliates") to engage in the
business of providing the Services to Subscribers in Canada, pursuant to
Subscriber Contracts, and by such delivery methods as shall be reasonably
approved from time to time by Muzak. All Affiliates shall execute an affiliate
agreement ("Affiliate Agreement") in accordance with Section 5.5 of this
Agreement.
1.1.3 Subject to the rights of the Existing Affiliates under the
Existing Contracts, Master Affiliate and Affiliates shall provide the Services
solely to Subscriber Premises located within Canada.
1.1.4 Muzak represents and warrants that it has the right to grant
the license as herein set forth (subject to all limitations also set forth
herein) without interference by or claim of any third person.
1.1.5 The geographic area in which Master Affiliate is licensed to
provide the Services and to license others to provide the Services hereunder,
which excludes the Existing Affiliate Territories of Existing Affiliates
pursuant to Existing Contracts until such time as Master Affiliate has rights
therein pursuant to this Agreement, is herein described as the "Licensed Area."
1.2 Limitations on Muzak: Except as provided in Section 1.3 below, Muzak
--------------------
shall not provide, nor license any other Person to provide, the Services within
Canada. As used in this Agreement, the term "Person" includes an individual,
corporation, partnership, joint venture, trust, unincorporated organization, or
other entity recognized by law.
4
<PAGE>
1.3 Rights Retained: Master Affiliate acknowledges that Muzak retains the
---------------
following rights:
1.3.1 To use, and to license others to use, the Distribution System
and the Proprietary Marks for the provision of the Services to Subscriber
Premises which are located outside Canada.
1.3.2 To provide the Services, and to use the Proprietary Marks in
connection therewith, to common carriers (including, without limitation,
operators of automobiles, ships, airplanes, trains, or buses) which sell or
provide common carrier service, in whole or in part, within Canada.
1.3.3 To provide a music service under the "YESCO(R)" name and
trademark to dealers of the "YESCO(R)" Foreground Music Service and their
customers pursuant to contractual obligations with such dealers; provided,
however, that Muzak shall not authorize such dealers to distribute any of the
Services or use the Proprietary Marks within Canada.
1.3.4 To perform Muzak's obligations under the Existing Contracts;
provided, however, that in renewing any Existing Contract in accordance with its
terms, Muzak shall not expand the applicable Existing Affiliate Territory or
grant to the applicable Existing Affiliate rights not now contained in the
Existing Contract, and provided further, that Muzak shall not at any time during
the term of this Agreement offer to any Existing Affiliate any Services that are
not also then offered to Master Affiliate.
5
<PAGE>
1.4 Use of the Proprietary Marks: This Agreement does not grant the
----------------------------
Master Affiliate the right to license the use of the Proprietary Marks in
Canada. Muzak shall license the Affiliates to use the Proprietary Marks.
1.5 Existing Affiliate Territories: Muzak represents and warrants to
------------------------------
Master Affiliate that Exhibit D hereto contains a complete and accurate list of
Existing Affiliates and Existing Affiliate Territories.
1.6 Qualification to Carry on Business.
----------------------------------
1.6.1 Muzak represents and warrants to Master Affiliate that:
(a) It is a limited partnership duly organized, validly
existing and in good standing pursuant to the applicable laws of the State of
Delaware and is duly qualified to do business and is in good standing in each
jurisdiction where the character of its properties, owned or leased, or the
nature of its business makes such qualification necessary, except where not
being so qualified and in good standing would not materially and adversely
affect its ability to carry out its obligations under this Agreement; and
(b) Field/Muzak, Inc. is the general partner of Muzak and
is a corporation duly incorporated and organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation with full power and
authority to perform its obligations as the general partner of Muzak and is duly
qualified to do business and is in good standing in each jurisdiction where the
character of its properties, owned or
6
<PAGE>
leased, or the nature of its business makes such qualification necessary, except
where not being so qualified and in good standing would not materially and
adversely affect the ability of Muzak to carry out its obligations under this
Agreement.
1.6.2 Master Affiliate represents and warrants to Muzak that it is a
corporation duly incorporated and organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and is duly
qualified to do business and is in good standing in each jurisdiction where the
character of its properties, owned or leased, or the nature of its business
makes such qualification necessary, except where not being so qualified and in
good standing would not materially and adversely affect its ability to carry out
its obligations under the Agreement;
1.6.3 Each of Muzak and Master Affiliate covenant to the other that
they will take such actions as are necessary to ensure that it does not breach
its representations and warranties to the other under this Section 1.5
including, without limitation, maintaining such current registrations and
obtaining such additional registrations as are required from time to time.
2. TERM AND RENEWAL
----------------
2.1 Term: The term of this Agreement shall commence as of the date first
----
written above and shall continue for ten (10) years thereafter (this being the
"Initial Term") and then shall thereafter continue for an additional five (5)
year term (the "Subsequent Term") if Master Affiliate elects to continue the
Agreement for such Subsequent Term and notifies Muzak of such
7
<PAGE>
election no later than twelve (12) months prior to the end of the Initial Term;
provided, however, that Master Affiliate shall have no right to elect to extend
the term of this Agreement for the Subsequent Term if Master Affiliate is in
default of any material provision of this Agreement or any other agreement
between Master Affiliate and Muzak, or if Master Affiliate failed to
substantially comply with all terms and conditions of all such agreements during
the terms thereof and did not cure such failure within a reasonable time after
written notice thereof.
3. DUTIES OF MUZAK
---------------
3.1 Services: Muzak shall distribute the Services to Master Affiliate,
--------
Affiliates, and Subscribers designated by Master Affiliate or Affiliates, using
such technologies as Muzak may designate pursuant to Section 3.2, including,
without limitation, direct broadcast satellite technologies ("DBS"), centrally-
delivered broadcast technologies, and on-premises technologies (the "Service
Delivery Methods"). In the event that a Service is to be delivered directly to
a Subscriber by DBS, Muzak shall commence such delivery promptly after receipt
of written notice from Master Affiliate or Affiliates.
3.2 Service Delivery Methods: The specifications for the current Service
------------------------
Delivery Methods are attached hereto as Exhibit E. The specifications for the
Service Delivery Methods may be modified by Muzak if such modifications are
necessary to maintain or improve the quality of delivery of the Services
provided hereunder; provided, however, that no such modification shall have the
effect of rendering the satellite receivers and
8
<PAGE>
associated antennae (collectively the "Earth Stations") then in use by Master
Affiliate incapable of receiving satellite transmissions unless such
modification is required by law or necessitated by the exercise of the rights of
third parties under the express terms of Muzak's satellite-space contracts
whether now existing or subsequently executed by Muzak.
3.3 Recorded Media: The Service Delivery Methods may include, without
--------------
limitation, provision of the Services on recorded media, including, without
limitation, in analog or digital form on magnetic tape or on compact disc (the
"Recorded Media"), for which Muzak may charge a fee as provided in Section 4.3
hereof. Muzak shall at all times retain title to, and all ownership rights in,
any Recorded Media furnished to Master Affiliate, Affiliates, or Subscribers.
Master Affiliate and Affiliates shall not sell, assign, transfer, convey, give
away, pledge, mortgage, or otherwise encumber any such Recorded Media. Master
Affiliate and Affiliates shall, by written agreement in a form satisfactory to
Muzak, acting reasonably, similarly prohibit Subscribers from selling,
assigning, transferring, conveying, giving away, pledging, mortgaging, or
otherwise encumbering any of such Recorded Media.
3.4 Adjunct Services: All sales of the Adjunct Services by Master
----------------
Affiliate and Affiliates shall be reflected in a fully executed Adjunct Services
Subscriber Contract, which Contract shall be in a form agreed upon by Muzak and
Master Affiliate, acting reasonably. Master Affiliate shall provide Muzak with
the Adjunct Services Subscriber Contract, executed by Master
9
<PAGE>
Affiliate or an Affiliate (as the case may be) and the Subscriber, at the time
Master Affiliate or the Affiliate requests Muzak to commence delivery of one or
more Adjunct Services to the Subscriber. Master Affiliate shall ensure that
prior to commencement of delivery of the Adjunct Services to a Subscriber in
Canada, an Earth Station has been installed by either Master Affiliate or the
Affiliate through which the Subscriber has subscribed for the Adjunct Services
at each Subscriber Premises where such Adjunct Services are to be received.
3.5 Substitution of Services:
------------------------
3.5.1 Except for the "Environmental Music by MUZAK(R)" and
"Foreground Music One(R)" Services, Muzak reserves the right to substitute a
different Service or to discontinue the distribution of a Service, if Muzak
reasonably determines that such substitution or discontinuation will be
beneficial to the Distribution System and provides to Master Affiliate at least
six (6) months' prior notice of such substitution or discontinuation. Such
substitution or discontinuation will not affect the validity of this Agreement,
which shall, in all respects, be deemed modified to provide for such
substitution or discontinuation.
3.5.2 If and in the event that Canadian laws, regulations or federal
policies hereafter require a specified percentage of Canadian content in the
Music Services, Muzak shall use its reasonable best efforts to comply with such
laws, regulations or policies within the time period stipulated therein for the
implementation thereof. If Muzak, having used such
10
<PAGE>
reasonable best efforts to so comply, is unable to comply with such laws,
regulations or policies within such time period, such event shall be deemed to
be an event of force majeure in accordance with the provisions of Section 12.5
hereof.
3.6 DBS: Notwithstanding any other provision or term of this Agreement to
---
the contrary, the Parties understand and agree that (i) Muzak will not deliver
any of the Services by means of DBS to any Person in the Licensed Area until
such date as all required governmental permits and authorizations for such
delivery have been received and Master Affiliate and Muzak have jointly
formulated a technical implementation plan for such delivery throughout such
Licensed Area (the "DBS Delivery Date"); and (ii) accordingly, those Services
that are delivered only by means of DBS, as shown on Exhibits A and B, cannot be
provided by Muzak and will not be required to be promoted by Master Affiliate
hereunder prior to the DBS Delivery Date. The technical implementation plan
described in the preceding sentence shall provide that Master Affiliate be
responsible for the acquisition and expense of all space segment transmission
capacity required for DBS delivery into such Licensed Area. Master Affiliate
shall acquire a minimum of three channels (two 7.5 khz or 15 khz music channels
for Environmental Music by MUZAK(R) and FOREGROUND MUSIC ONE(R) programming, and
one 9.6kh channel for command and control) in connection therewith. The
technical implementation plan shall further provide that Muzak shall (i) be
responsible for delivering the music and advertising messaging (to the extent
permitted by applicable law) to a site in Toronto, Canada for
11
<PAGE>
subsequent retransmission via the Canadian satellite on which Master Affiliate
has acquired space segment capacity and (ii) provide technical and operations
support (including command/control channel addressing and receiver management)
to manage the music and advertising channel scheduling and delivery.
3.7 Additional Covenants Regarding Mechanical and Performance Rights.
----------------------------------------------------------------
3.7.1 Muzak shall obtain and maintain, at its cost, mechanical
recordation rights from the Canadian Musical Reproduction Rights Agency or any
successor licensing agency or agencies, for the use of the Music Services in
Canada, if and to the extent that such rights are required for the provision of
the Music Services pursuant to the terms of this Agreement. Master Affiliate
shall use its best efforts to assist in such licensing efforts as reasonably
requested by Muzak. Master Affiliate shall obtain and maintain, at its cost,
mechanical recordation rights for any musical selections contained in the Music
Services which are not licensed through the Canadian Musical Reproduction Rights
Agency or any successor thereto, if and to the extent that such rights are
required for the provision of the Music Services pursuant to the terms of this
Agreement. Master Affiliate shall promptly notify Muzak if it is unable to
obtain any such mechanical recordation rights and upon receipt of such notice,
Muzak will delete the musical selection or selections for which mechanical
recordation rights have not been obtained from the Music Services.
12
<PAGE>
3.7.2 Muzak makes no warranties or representations whatsoever
regarding performance rights within the Licensed Area for the musical selections
contained in the Music Services. Master Affiliate shall obtain and maintain, at
its expense, all performance rights in and for the musical selections contained
in the Music Services to the extent that such action may be necessary or
required for the operation of the business licensed to Master Affiliate
hereunder and the performance of the Services within the Licensed Area.
3.8 Music Quality. In the event that Master Affiliate believes that the
-------------
Music Services, as a whole, have declined in quality from the date of this
Agreement, Master Affiliate shall give Muzak notice of such belief and shall
include in such notice a detailed description of the specific elements of the
Music Services that Master Affiliate believes should be changed in order to
improve the quality of the Music Services. Such detailed description shall set
forth with specificity both the manner in which and the degree to which such
elements have adversely changed since the date of this Agreement. Muzak shall
respond to such notice in writing within 30 days after its receipt thereof. In
the event that the adverse changes described by Master Affiliate are verifiable
and verified, are reasonably seen as having a material negative effect on the
music services, and are correctable with the exercise of reasonable efforts,
Master Affiliate shall have the right to terminate this Agreement unless Muzak
commences to correct such adverse changes within 90 days after receipt of Master
Affiliate's detailed description and
13
<PAGE>
then reasonably pursues its corrective action to completion. If such corrective
action is not proceeding on a reasonable basis, Master Affiliate shall have the
right to use other music services in its discretion until the quality is fully
restored. Nothing in this paragraph shall be deemed to modify or amend Article
4 of this Agreement.
If technically, operationally, and financially feasible, and subject to the
limitations with respect to DBS described in Section 3.6 hereof, Muzak will
provide programmed music, adjunct services and support to Master Affiliate's
Canadian distribution equal to the performance levels presently in effect in the
domestic U.S. franchise arrangement and also use its best efforts to provide
future improvements and expanded services introduced to the U.S. domestic
franchise organization. Muzak will provide music content and programming style
and structure on equivalent terms as is provided to the U.S. domestic franchise
organization.
4. FEES
----
4.1 Royalty Fees:
------------
4.1.1 Gross Billings of Master Affiliate: Master Affiliate shall pay
----------------------------------
to Muzak a monthly royalty fee on Gross Billings (as defined in Section 4.8 of
this Agreement) as follows:
<TABLE>
<CAPTION>
Percentage of
Period Gross Billings
------ --------------
<S> <C>
September 1, 1990 - August 31, 1992 5%
September 1, 1992 - August 31, 1994 6%
Thereafter 7%
</TABLE>
14
<PAGE>
4.1.2 Gross Billings of Affiliates: Master Affiliate shall collect,
----------------------------
on a monthly basis, a percentage of Affiliates' Gross Billings in royalty fees.
The percentage of Gross Billings collected by Master Affiliate as royalty fees
shall be determined in the sole discretion of Master Affiliate, provided that
Master Affiliate shall pay to Muzak, on a monthly basis, seven percent (7%) of
all Affiliates' Gross Billings. In addition, Master Affiliate shall pay to
Muzak, on a monthly basis, one half (1/2) of all royalty fees collected by
Master Affiliate in excess of seven percent (7%) of all Affiliates' Gross
Billings.
4.1.3 DBS Gross Billings of Master Affiliate: Master Affiliate shall
--------------------------------------
pay to Muzak a monthly royalty fee in the amount of ten percent (10%) of all DBS
Gross Billings (as defined in Section 4.7).
4.1.4 DBS Gross Billings of Affiliates: Master Affiliate shall
--------------------------------
collect a monthly percentage of Affiliates' DBS Gross Billings in royalty fees.
The percentage of DBS Gross Billings collected by Master Affiliate as royalty
fees shall be determined in the sole discretion of Master Affiliate, provided
that Master Affiliate shall pay to Muzak, on a monthly basis, ten percent (10%)
of all Affiliates' DBS Gross Billings. In addition, Master Affiliate shall pay
to Muzak, on a monthly basis, one half (1/2) of all royalty fees collected by
Master Affiliate in excess of ten percent (10%) of all Affiliates' DBS Gross
Billings.
4.1.5 DBS Surcharge: In consideration of Muzak's development and
-------------
implementation of the DBS Service Delivery
15
<PAGE>
Method, Master Affiliate shall pay to Muzak a monthly surcharge (the "DBS
Surcharge") throughout the term of this Agreement; provided, however, that
Master Affiliate's obligation to pay the DBS Surcharge shall not commence until
the DBS Delivery Date (as defined in Section 3.6) and shall no longer exist
after Master Affiliate has paid to Muzak the DBS Surcharge for a total of
ninety-six (96) consecutive calendar months. The DBS Surcharge shall be equal
to the following percentage of DBS Gross Billings:
<TABLE>
<CAPTION>
Monthly
Percentage of
Calendar Months DBS Gross Billings
--------------- ------------------
<S> <C>
1 through 12 0.50%
13 through 24 1.25%
25 through 60 1.75%
61 through 96 1.00%
thereafter 0.00%
</TABLE>
In addition, in accordance with the terms of the Affiliate Agreement, Master
Affiliate shall collect from each Affiliate, and remit to Muzak, the DBS
Surcharge set forth above.
4.2 Adjunct Services Charges: Master Affiliate shall pay Muzak's Adjunct
------------------------
Services charges in accordance with the terms agreed to by the Parties on or
before the DBS Delivery Date for all Adjunct Services distributed to Master
Affiliate, the Affiliates and Subscribers in Canada.
4.3 Recorded Media Charges: Master Affiliate shall pay Muzak's standard
----------------------
Recorded Media charges, as the same may be set forth by Muzak from time to time
in writing, for all Recorded Media distributed to Master Affiliate.
4.4 Market Fees: In accordance with the terms of the Affiliate Agreement,
-----------
Affiliates are required to pay to Master
16
<PAGE>
Affiliate a market fee on or before the first day of each month. Master
Affiliate shall remit to Muzak by the tenth (10th) day of each month all market
fees due from Affiliates for that month.
4.5 Transfer Fees: Where, in accordance with the terms of the Affiliate
-------------
Agreement, Affiliates are required to pay to Master Affiliate a transfer fee
upon the sale, assignment, transfer, or other conveyance of an Affiliate
Agreement, Master Affiliate shall be entitled to retain fifty percent (50%) of
each such transfer fee, provided Master Affiliate shall remit to Muzak fifty
percent (50%) of the transfer fee within ten (10) days after such fee is charged
to an Affiliate by Master Affiliate. In the event Master Affiliate thereafter
is unable to collect all or any part of the transfer fee, despite undertaking
reasonable collection efforts, Master Affiliate shall so notify Muzak and Muzak
shall promptly refund to Master Affiliate the difference between (i) the amount
of such transfer fee previously remitted by Master Affiliate to Muzak and (ii)
50% of the amount of the transfer fee, if any, actually collected by Master
Affiliate.
4.6 Payments: All payments due to Muzak under this Agreement shall be
--------
paid in Canadian dollars at a location to be specified in writing, from time to
time, by Muzak. All monthly payments required by Section 4.1 shall be paid by
the last day of each month on the Gross Billings and DBS Gross Billings for the
preceding calendar month, and shall be submitted to Muzak together with any
reports or statements required under Article 9 hereof. All agreed Adjunct
Services charges referred to in Section 4.2 and all Recorded Media charges
required by Section
17
<PAGE>
4.3 shall be paid within thirty (30) days after the date of billing by Muzak.
Any payment of fees due to Muzak that is not actually received by Muzak on or
before the due date shall be deemed overdue. If any payment is overdue, Master
Affiliate shall pay Muzak, in addition to the overdue amount, interest on such
overdue payment from the due date until the date of payment, at that rate per
annum which is equal to the prime commercial lending rate published by The Royal
Bank of Canada in the city of Toronto from time to time plus 2%, such interest
to be calculated always at the aforesaid effective rate per annum on the said
overdue amount from time to time, and then accrued as owing on a daily basis.
Entitlement to such interest shall be in addition to any other remedies Muzak
may have under law as a result of the overdue payment.
4.7 DBS Gross Billings: "DBS Gross Billings" means: All amounts billed
------------------
or otherwise charged to a Subscriber in connection with (1) the provision of any
DBS Music Service; (2) the lease or rental (but not the sale) of Service
Delivery Equipment (as defined in Section 5.2) and other equipment used to
receive DBS Music Services (including, without limitation, amplifiers, speakers,
wire, volume controls, relays, switches, receivers, mixers, tuners, Earth
Stations, baffles, and level controls, but not including equipment that is not
used in the provision or reception of a Service, such as intercoms, microphones,
and extra amplifiers). Notwithstanding the foregoing, DBS Gross Billings shall
not include any amount billed or otherwise charged to a Subscriber for (i) the
provision of any Music Service on Recorded
18
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Media, (ii) dayparting, weekparting, or switching services, or (iii) the lease
or rental of any Service Delivery Equipment used with Recorded Media. DBS Gross
Billings also shall not include (i) any amounts billed to Subscribers as (and
separately stated on the billings as) sales or similar excise taxes; (ii) one-
time installation charges billed not later than ninety (90) days following
completion of such installation; (iii) charges for service of Subscriber-owned
equipment, provided that such charges are separately stated as being for such
service (and not for any music or other maintenance service) in the pertinent
Subscriber Contract; (iv) ad hoc (i.e., extraordinary) charges for service
-- --- ----
actually performed on Subscriber-leased equipment; and (v) late-payment
penalties or interest charges imposed by Master Affiliate, provided that such
penalties and charges do not exceed standard industry practice. Appropriate
music performing rights fees and mechanical recordation rights fees paid in
connection with the provision of the DBS Music Services and any billings that
were previously reported to Muzak as part of DBS Gross Billings but which are in
the month of deduction written off for income tax purposes as uncollectible may
be deducted from DBS Gross Billings.
4.8 Gross Billings: "Gross Billings" means the sum of the following:
--------------
4.8.1 Amounts Billed to Subscribers: All amounts billed or otherwise
-----------------------------
charged to a Subscriber (other than amounts included in the definition of DBS
Gross Billings) in connection with (1) the provision of any Music Service
(except those
19
<PAGE>
provided via DBS); (2) the lease or rental (but not the sale) of Service
Delivery Equipment and other equipment used to receive Music Services (except
those provided via DBS), including, without limitation, amplifiers, speakers,
wire, volume controls, relays, switches, receivers, mixers, tuners, Earth
Stations, baffles, and level controls, but not including equipment that is not
used in the provision or reception of a Music Service, such as intercoms,
microphones, and extra amplifiers. Notwithstanding the foregoing, Gross
Billings shall not include any amount billed or otherwise charged to a
Subscriber for (i) the provision of any Music Service on Recorded Media, (ii)
dayparting, weekparting, or switching services, or (iii) the lease or rental of
any Service Delivery Equipment used with Recorded Media. Gross Billings also
shall not include (i) any amounts billed to Subscribers as (and separately
stated on the billings as) sales or similar excise taxes; (ii) one time
installation charges billed to Subscribers not later than ninety (90) days
following completion of such installation; (iii) charges for service of
Subscriber-owned equipment, provided that such charges are separately stated as
being for such service (and not for any music or other maintenance service) in
the pertinent Subscriber Contract; (iv) ad hoc (i.e., extraordinary) charges for
-- --- ----
service actually performed on Subscriber-leased equipment; and (v) late-payment
penalties or interest charges imposed by Master Affiliate on Subscribers,
provided that such penalties and charges do not exceed standard industry
practice. Appropriate music performing rights fees and mechanical recordation
rights fees paid in
20
<PAGE>
connection with the provision of the Music Services (other than the DBS Music
Services) and any amounts billed or otherwise charged to a Subscriber that were
previously reported to Muzak as part of Gross Billings under this Section 4.8.1
but which are in the month of deduction written off for income tax purposes as
uncollectible may be deducted from Gross Billings.
4.8.2 Amounts Billed to Other Customers: Amounts billed or otherwise
---------------------------------
charged by Master Affiliate for music program and adjunct communications
services (other than the Services and other than services Master Affiliate is
permitted to distribute under Section 14.1) provided by Master Affiliate to
customers on January 1, 1991 and thereafter in the Licensed Area.
5. DUTIES OF MASTER AFFILIATE
--------------------------
Master Affiliate understands and acknowledges that every detail of the
Distribution System is important in order to develop and maintain high operating
standards, to increase the demand for the Services sold through the Distribution
System, and to protect Muzak's Distribution System, Proprietary Marks,
reputation, and goodwill.
5.1 MUZAK(R) Name: Master Affiliate shall use and promote the Proprietary
-------------
Marks, including the MUZAK(R) name, in the Licensed Area. Except in the case of
an extraordinary marketing effort specifically requested by Muzak, for which
Muzak will participate in the attendant costs, Master Affiliate will, at its
sole expense, prepare sales and marketing literature for the Canadian market
that promotes the MUZAK(R) name and other Proprietary Marks and the Services.
Muzak shall provide Master Affiliate with
21
<PAGE>
reasonable access to original text graphics and photographic/artistic materials
used by Muzak in its sales and advertising efforts in the United States of
America. Master Affiliate shall distribute the sales and marketing literature
so produced for the Canadian market to the Affiliates, Subscribers and
prospective Subscribers. Subject to the foregoing, the Parties agree that
Master Affiliate shall not be under any obligation to use the MUZAK(R) name in
juxtaposition with its own name in connection with the delivery of the Services
to Subscribers or, except as provided in Section 7.1 below, to place the
MUZAK(R) name, or any other Proprietary Marks, on Subscriber Contracts.
5.2 Service Delivery Equipment; Permits and Approvals:
-------------------------------------------------
5.2.1 Service Delivery Equipment: Master Affiliate, at Master
--------------------------
Affiliate's expense, shall obtain and maintain such equipment (including,
without limitation, Earth Stations) as is reasonably required to enable Master
Affiliate to receive and distribute the Services and shall obtain and make
available to the Subscribers such equipment as is reasonably required to enable
the Subscribers to receive the Services (collectively, the "Service Delivery
Equipment"). The Service Delivery Equipment shall conform to the standards and
specifications attached hereto as Exhibit F. Muzak may modify such standards
and specifications from time to time if Muzak reasonably believes such
modifications are necessary to maintain or improve the effectiveness or quality,
or reduce the price, of the Service Delivery Equipment; provided, however, that
no such modifications shall have the
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<PAGE>
effect of rendering the Earth Stations then owned or leased by Master Affiliate
incapable of receiving satellite transmissions unless such modifications are
necessitated by law or by the exercise of the rights of third parties under the
express terms of Muzak's satellite-space contracts whether now existing or
subsequently executed.
5.2.2 Permits and Approvals: Master Affiliate shall, at its expense,
---------------------
obtain and maintain any Canadian governmental permits and approvals which are
required for the installation and operation of the Service Delivery Equipment to
be used by Master Affiliate in providing the Services to its Subscribers. Muzak
shall, at its expense, obtain and maintain any non-Canadian governmental permits
and approvals which are required for the installation and operation of the
Service Delivery Equipment to be used by Master Affiliate in providing the
Services to its Subscribers. Muzak shall provide such assistance to Master
Affiliate and Master Affiliate shall provide such assistance to Muzak as shall
be reasonably requested from time to time in order to obtain and maintain such
permits and approvals.
5.3 Modification Prohibited: Master Affiliate shall not alter the
-----------------------
Services provided by Muzak and, except as otherwise herein specifically
provided, shall not substitute or include any musical or other selections which
are not part of the Music Services in the Music Services which it furnishes to
Affiliates or Subscribers. Master Affiliate shall also notify Muzak within five
(5) business days after any Responsible Person of Master Affiliate becomes aware
of any alteration of any Service or
23
<PAGE>
substitution or inclusion of musical selections in any Music Service by any
Affiliate or Subscriber. (As used in this Agreement, "Responsible Person" means
any person who is a director or officer, or otherwise is employed in a
supervisory or managerial position.) Notwithstanding the foregoing, in the
event that Muzak fails to provide the Music Services (other than those provided
on Recorded Media) for a period of 24 hours (with such failure to include one or
more material intermittent failures during such 24-hour period) and does not
correct such failure within the 24-hour period following oral or written notice
to a Responsible Person of Muzak thereof, Master Affiliate shall have the right
to provide other music services to the Subscribers until such time as such
failure is corrected. The period during which Master Affiliate shall have such
right is referred to herein as the "Period Of Material Failure." Master
Affiliate will not be deemed to be in default of Section 14.1 hereof by virtue
of its provision of such other music services solely during any Period Of
Material Failure described in this Section 5.3 (or by virtue of its entering
into agreements to have such other music services, provided that the use of such
other music services occurs only during such Periods Of Material Failure).
Master Affiliate shall under no circumstances represent or indicate that any
Service not produced by Muzak has been produced by Muzak; provided, however,
that Master Affiliate shall have no duty to inform Subscribers of any
substitution of music services that occurs in accordance with this Section 5.3.
24
<PAGE>
5.4 Unauthorized Reception or Duplication: Master Affiliate shall not
-------------------------------------
permit any unauthorized reception of the Services as provided to Master
Affiliate, Affiliates, and Subscribers. Upon the written request of Muzak,
Master Affiliate shall take such reasonable steps as may be necessary to improve
the security of the Service Delivery Methods so as to prevent any such
unauthorized reception. Master Affiliate shall not duplicate all or any part of
the Services and shall not permit any other person to duplicate all or any part
of the Services as provided to Master Affiliate, Affiliates and Subscribers.
Master Affiliate shall obtain a written agreement from all Affiliates and all
Subscribers, in such form as shall be approved by Muzak, acting reasonably,
prohibiting the duplication of all or any part of the Services.
5.5 Execution of Affiliate Agreements:
---------------------------------
5.5.1 New Affiliates: In accordance with Section 1.1.2, Master
--------------
Affiliate shall require each Affiliate to execute the form of Affiliate
Agreement attached hereto as Exhibit G or such amended form thereof as is
consented to in writing by Muzak (whose consent shall not be unreasonably
withheld). Master Affiliate shall amend the Affiliate Agreement only with the
prior written consent of Muzak, which shall not be unreasonably withheld. Each
Affiliate Agreement shall be executed by both Muzak and Master Affiliate and
Muzak shall not unreasonably refuse to execute an Affiliate Agreement that
complies with this Section 5.5.1 (including, without limitation, Exhibit G
referred to herein). Master Affiliate shall provide Muzak with a copy of
25
<PAGE>
each fully executed Affiliate Agreement. In addition, Master Affiliate shall
provide Muzak with copies of every ancillary and collateral agreement, if any,
executed in conjunction with an Affiliate Agreement, including, without
limitation, any covenants against competition, any covenants regarding
confidential information, and any covenants prohibiting the duplication of the
Services.
5.5.2 Existing Affiliates: Master Affiliate shall offer each
-------------------
Existing Affiliate the opportunity to execute an Affiliate Agreement.
Notwithstanding Section 1.3.4 of this Agreement, Master Affiliate and Muzak
shall cooperate in attempting to convince Existing Affiliates to execute the
Affiliate Agreement on such terms as are acceptable to both Master Affiliate and
Muzak, acting reasonably. (It is understood that unless and until an Existing
Affiliate executes an Affiliate Agreement to replace its Existing Contract, such
Existing Affiliate shall not be considered an Affiliate for purposes of this
Agreement.) Prior to the execution by Master Affiliate of an Affiliate
Agreement with an Existing Affiliate, Muzak shall provide to Master Affiliate a
written declaration to the effect that, to the best knowledge of Muzak at that
time, either (i) such Existing Affiliate is then substantially in compliance
with the terms of its Existing Contract, or (ii) such Existing Affiliate is not
then substantially in compliance with the terms of its Existing Contract, for
the reasons specified in such declaration. Muzak shall complete an audit of
each Existing Affiliate on or before December 31, 1990 and shall report to
26
<PAGE>
Master Affiliate promptly thereafter any operating activities not in compliance
with any Existing Affiliate's Existing Contract.
5.6 Enforcement of Affiliate Agreements: Master Affiliate shall
-----------------------------------
faithfully and promptly perform all of the obligations required of it under the
Affiliate Agreement, and Muzak shall faithfully and promptly perform all of the
obligations required of it under the Affiliate Agreement. Master Affiliate
shall enforce those provisions of the Affiliate Agreement that impose
obligations on the Affiliate for the benefit of Master Affiliate, and Muzak
shall enforce those provisions of the Affiliate Agreement that impose
obligations on the Affiliate for the benefit of Muzak; provided, however, that
the enforcing Party shall notify the other Party at least 24 hours prior to
commencing any such enforcement efforts. Enforcement of those provisions of the
Affiliate Agreement that are for the benefit of both Muzak and Master Affiliate
shall be enforced by Muzak and/or Master Affiliate, as reasonably determined
between them at the time such enforcement becomes necessary. Each Party hereto
shall promptly inform the other Party of any breach of an Affiliate Agreement by
an Affiliate of which a Responsible Person of such first-named Party becomes
aware. Neither Party shall unreasonably withhold its consent to a request for
termination of an Affiliate Agreement by the other Party.
5.7 Staff: Master Affiliate shall maintain and train such staff as is
-----
reasonably required to meet its day-to-day obligations hereunder.
27
<PAGE>
5.8 Sales Growth: During the Initial Term and Subsequent Term, if any, of
------------
this Agreement, Master Affiliate shall use its best efforts to meet its
obligations hereunder to promote the Services in the Licensed Area and shall
otherwise conduct the business contemplated by this Agreement in a diligent
manner. The foregoing shall not be deemed to preclude Master Affiliate from
providing to a Subscriber or to an Affiliate other services that are not the
same as, similar to, or competitive with the Services.
5.9 Central Warehousing: Master Affiliate shall use reasonable efforts to
-------------------
develop and maintain a facility to sell (and to facilitate the sale by third
parties) to Affiliates such equipment as would ordinarily be required to be
purchased by Affiliates under the Affiliate Agreement.
5.10 Training Programs: Master Affiliate shall use reasonable efforts to
-----------------
develop and offer training programs to the Affiliates, at least annually, in
order to provide the Affiliates with guidance and assistance in the operation of
their businesses as licensed under the Affiliate Agreements, including, without
limitation, the marketing and distribution of the Services. Muzak shall offer
reasonable assistance to Master Affiliate in structuring such training programs.
6. PROPRIETARY MARKS
-----------------
6.1 Muzak Representations: Muzak represents and warrants that it is the
---------------------
owner of all right, title, and interest in and to the Proprietary Marks. Muzak
will take all steps reasonably
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<PAGE>
necessary to preserve and protect its ownership and the validity of the
Proprietary Marks.
6.2 Validity and Infringement:
-------------------------
6.2.1 Master Affiliate expressly acknowledges and agrees that the
Proprietary Marks serve to identify the Services and those who are authorized to
distribute the Services. During the term of this Agreement, Master Affiliate
shall not directly or indirectly contest the validity or Muzak's ownership of
the Proprietary Marks or, without derogating from any right of Master Affiliate
set forth in this Agreement, take any action which it ought reasonably to have
foreseen would impair the validity or enforceability of the Proprietary Marks.
6.2.2 Master Affiliate shall promptly notify Muzak of any suspected
infringement of the Proprietary Marks, any challenge to the validity of the
Proprietary Marks, or any challenge to Muzak's ownership of, Muzak's right to
use and to license others to use, or Master Affiliate's right to use, the
Proprietary Marks of which a Responsible Person of Master Affiliate becomes
aware. Master Affiliate acknowledges that Muzak has the right to take action
against infringing uses of the Proprietary Marks and to direct and control any
administrative proceeding or litigation involving the Proprietary Marks,
including, without limitation, any settlement thereof. Muzak shall have the
obligation to take action against infringing uses of the Proprietary Marks in
Canada if (i) Master Affiliate requests, in writing, that Muzak take such
action; and (ii) the continuation of such infringement is reasonably likely to
29
<PAGE>
materially diminish Master Affiliate's benefits under this Agreement; and (iii)
the financial benefits (to both Master Affiliate and Muzak) of taking such
action are reasonably likely to exceed the costs of taking such action.
6.2.3 Muzak shall defend Master Affiliate against any third-party
claim, suit, or demand against Master Affiliate arising out of Master
Affiliate's or an Affiliate's use of the Proprietary Marks. If Muzak reasonably
determines that Master Affiliate has complied with Master Affiliate's
obligations under this Article 6, the cost of such defense, including, without
limitation, the cost of any judgment or settlement, shall be borne by Muzak. If
Master Affiliate has not complied with its obligations under this Article 6 and
such third-party claim, suit or demand is the result of Master Affiliate's non-
compliance with its obligations under this Article 6, the cost of such defense,
including, without limitation, the cost of any judgment or settlement, shall be
borne by Master Affiliate.
6.2.4 In the event Muzak undertakes the defense or prosecution of any
litigation relating to Master Affiliate's or an Affiliate's use of the
Proprietary Marks, Master Affiliate agrees to execute any and all documents and
to do such acts and things as may be necessary to carry out such defense or
prosecution, including, but not limited to, becoming a nominal party to any
legal action. Except to the extent that such litigation is the result of Master
Affiliate's failure to comply with Master Affiliate's obligations under this
Article 6, Muzak agrees to reimburse Master Affiliate for its out-of-pocket
costs
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<PAGE>
in doing such acts and things; provided, however, that Master Affiliate shall
bear the salary costs of its employees.
6.3 Authorized Use: With respect to Master Affiliate's use of the
--------------
Proprietary Marks pursuant to this Agreement, Master Affiliate agrees that:
6.3.1 Without derogating from any right of Master Affiliate set forth
in this Agreement, Master Affiliate shall use only the Proprietary Marks
designated by Muzak. Master Affiliate's right to use the Proprietary Marks is
limited to such uses as are authorized under this Agreement, and any
unauthorized use thereof shall constitute an infringement of Muzak's rights.
6.3.2 Master Affiliate shall not use the Proprietary Marks as part of
its corporate or other legal name. Master Affiliate shall promptly sign a
registered user agreement, in such form as is consistent with the terms of this
Agreement, prepared by Muzak for submission to the Canadian Trade Marks Office,
the filing and cost of which shall be the responsibility of Muzak. Master
Affiliate shall promptly sign an application to cancel the registration of its
registered user agreement upon expiry, non-renewal, termination or Master
Affiliate's assignment of this Agreement. Master Affiliate shall use its best
effort to have its assignee promptly sign such a registered user agreement. All
such assignee registered user agreements and all such applications for
cancellation of the registration of a registered user agreement shall be in such
form as is consistent with the terms of this Agreement and shall be prepared by
Muzak for submission to the Canadian Trade Marks office, the filing and
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<PAGE>
costs of all of which shall be the responsibility of Muzak. In the event that
Master Affiliate shall fail to sign such application for cancellation of the
registration of its registered user agreement, then Master Affiliate hereby
irrevocably nominates, constitutes and appoints the person serving from time to
time as the Secretary of the general partner of Muzak to be its attorney-in-fact
to execute in Master Affiliate's name and on its behalf the application for
cancellation of the registration of Master Affiliate's registered user
agreement, and to execute all such other documents and instruments and to carry
out all such other acts and deeds as may be reasonably required in order to
achieve the cancellation of the registration of Master Affiliate as a registered
user of the Proprietary Marks.
6.3.3 Master Affiliate shall not use the Proprietary Marks to incur
any obligation or indebtedness on behalf of Muzak.
6.3.4 Unless otherwise authorized or required by Muzak, Master
Affiliate shall use the Proprietary Marks without prefix or suffix and shall
comply with Muzak's reasonable written instructions regarding (i) the use of the
federal registration symbol and other trademark or service mark designations and
(ii) the identification of Muzak as the owner and Master Affiliate as a user of
the Proprietary Marks.
6.4 Execution of Documents: Master Affiliate shall execute such documents
----------------------
as are reasonably required by Muzak or its counsel to obtain protection for the
Proprietary Marks or to maintain their continued validity and enforceability.
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<PAGE>
6.5 Ownership of Goodwill:
---------------------
6.5.1 Master Affiliate expressly understands and acknowledges that
Muzak is the owner of all right, title, and interest in and to the Proprietary
Marks and the goodwill associated with and symbolized by them. Master
Affiliate's use of the Proprietary Marks pursuant to this Agreement does not
give Master Affiliate any ownership interest or other interest in or to the
Proprietary Marks, except the license granted by this Agreement. Master
Affiliate shall not register or attempt to register the Proprietary Marks or any
trade names or marks which are confusingly similar thereto.
6.5.2 Any and all goodwill arising from Master Affiliate's use of the
Proprietary Marks under the Distribution System shall inure solely and
exclusively to Muzak's benefit and no monetary amount shall be assigned as
attributable to any goodwill associated with Master Affiliate's use of the
Distribution System or Proprietary Marks.
6.6 Substitution of Proprietary Marks: Except for the MUZAK(R) trademark,
---------------------------------
Muzak reserves the right to substitute different proprietary marks for use in
identifying the Distribution System and the Services if the Proprietary Marks no
longer can be used, or if Muzak, in its sole discretion, reasonably determines
that substitution of different proprietary marks will be beneficial to the
Distribution System. Such substitution shall not affect the validity of this
Agreement, which shall, in all respects, be deemed modified to provide for such
substitution. Except with respect to costs to be borne by
33
<PAGE>
Muzak pursuant to Section 6.3.2 hereof, Master Affiliate shall implement
promptly any such substitution of the Proprietary Marks with respect to its own
use thereof at its own expense.
7. NATIONAL ACCOUNTS PROGRAM
-------------------------
7.1 National Accounts: Each of the Parties recognizes that accounts with
-----------------
fifty (50) or more locations in two (2) or more Affiliate territories in Canada
("National Accounts") represent a significant potential market for Master
Affiliate and Affiliates marketing the Services and that the effective marketing
of the Services to such accounts frequently requires a coordinated effort.
Master Affiliate shall establish and shall maintain as part of its marketing and
promotion, during the term of this Agreement, a National Accounts Program. The
National Accounts Program shall:
7.1.1 Identify key customers.
7.1.2 Develop and execute specific strategies to sell to National
Accounts.
7.1.3 Maintain effective communication among Affiliates regarding
specific National Accounts.
7.1.4 Establish a centralized billing and administration capability
for National Accounts in keeping with Canadian law and practice.
7.1.5 Utilize a form of agreement that requires the use of MUZAK(R)
Services, subject to substitution pursuant to Section 5.3 hereof, during the
term of the agreement and that provides that such requirement is not subject to
amendment.
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7.2 Assistance by Muzak: Muzak shall provide such assistance in the
-------------------
establishment and maintenance of such National Accounts Program as Master
Affiliate may from time to time reasonably request.
7.3 General:
-------
7.3.1 Notwithstanding anything herein contained (and without
derogating from the obligations of Master Affiliate under Section 5.8), Muzak
and Master Affiliate acknowledge that, in order to accommodate the needs and
desires of particular accounts served or proposed to be served under the
National Accounts Program, Master Affiliate may, on a case-by-case basis,
request Muzak to, and Muzak may (but shall not be obligated to), waive certain
provisions of this Agreement, and Muzak will, subject to the foregoing, work
with Master Affiliate in a good faith attempt to accommodate such accounts in a
manner that will both promote the development of the National Accounts Program
and maintain the integrity of relationships between Master Affiliate and such
accounts.
7.3.2 In the event that Master Affiliate executes a Subscriber
Contract with a Subscriber in respect of a location outside of Ontario that has,
at that time, fifty (50) or more locations, such Subscriber Contract shall
require the use of MUZAK(R) Services during the term of such Subscriber Contract
and shall provide that such requirement is not subject to amendment.
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<PAGE>
8. MARKETING AND PROMOTION
-----------------------
8.1 Submission of Samples: Without derogating from any right of Master
---------------------
Affiliate set forth in this Agreement, all advertising and promotion by Master
Affiliate, in any manner or medium, relating to the business licensed by this
Agreement shall be conducted in a dignified, honest and ethical manner and shall
not be misleading and shall not reflect adversely on the goodwill of Muzak,
Master Affiliate, Affiliates, the Proprietary Marks, or the Distribution System.
Master Affiliate shall submit to Muzak, for its information, samples of all
advertising and promotional plans and materials relating to the business
licensed by this Agreement and the Affiliate Agreements that Master Affiliate
proposes to use and which have not been prepared by or previously submitted to
Muzak. Master Affiliate shall discontinue use of and require Affiliates to
discontinue use of any such advertising where Muzak reasonably determines, and
notifies Master Affiliate in writing, that such advertising fails to comply with
the requirements of this Section 8.1.
8.2 Promotional Materials: Master Affiliate shall prepare, and provide to
---------------------
the Affiliates, sales and advertising materials, and shall provide reasonable
assistance and incentives to the Affiliates to enhance their marketing of the
Services and related equipment and products.
9. ACCOUNTING AND RECORDS
----------------------
9.1 Maintain Records; Inspection: Master Affiliate shall maintain and
----------------------------
shall preserve for at least four (4) years from the dates of their preparation,
full, complete, and accurate books,
36
<PAGE>
records, and accounts covering all transactions relating to this Agreement (the
"Records") in accordance with generally accepted accounting principles as
applied in Canada and in the form and manner as may be reasonably prescribed by
Muzak from time to time in writing. Such Records shall at all times be retained
at the principal place of business of Master Affiliate and shall be available
for inspection by Muzak from time to time until four (4) years following the
expiration of the final term of this Agreement, during reasonable business hours
and upon reasonable notice. Muzak shall have the right to make copies of any
extracts of Master Affiliate's Records. If such right is exercised by Muzak
with respect to the Records of Master Affiliate, any copying shall be at Muzak's
expense.
9.2 Monthly Reports: Master Affiliate shall submit to Muzak, together
---------------
with the monthly payments required by Article 4 hereof, a royalty report, in the
form as may be reasonably prescribed by Muzak, accurately reflecting all Gross
Billings and DBS Gross Billings of Master Affiliate and Affiliates during the
preceding calendar month, and such other data or information covering the
transactions relating to this Agreement as Muzak may reasonably require from
time to time.
9.3 Audit: Master Affiliate shall, upon request of Muzak, but not more
-----
than once in any twelve (12) month period, furnish to Muzak as soon as
practicable, following such request, a detailed statement prepared by Master
Affiliate and certified by an independent Chartered Accountant acceptable to
Muzak, showing, in such form as Muzak may reasonably request, all relevant
37
<PAGE>
information within Master Affiliate's control to enable Muzak to determine and
verify the accuracy of the amounts payable to Muzak hereunder (the "Audit"). In
the event the Audit indicates that there has been either an underpayment or
overpayment of the amounts due Muzak hereunder, then, within thirty (30) days
after such determination, Master Affiliate or Muzak, as the case may be, shall
pay to the other the amount of such underpayment or overpayment. If it is
determined that there has been an underpayment of seventeen percent (17%) or
more of the amounts due Muzak for any given calendar year due to the gross
negligence or wilful misconduct of Master Affiliate, Master Affiliate shall pay
to Muzak, within thirty (30) days after such determination and in addition to
all other amounts due under this Agreement, an amount equal to fifteen percent
(15%) of the underpayment for that year. The foregoing remedies shall be in
addition to any other remedies Muzak may have.
10. INSURANCE
---------
On the date hereof, Master Affiliate maintains in full force and effect
insurance of the type and in an amount that is consistent with prudent business
practice for companies carrying on businesses similar to that carried on by
Master Affiliate. Master Affiliate hereby covenants and agrees to maintain
insurance of such type and in such amount as is consistent with such prudent
business practices during the term of this Agreement.
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<PAGE>
11. TRANSFER OF INTEREST
--------------------
Each Party may assign all (but not less than all, except in the case of an
assignment for security purposes only) of its rights and obligations under this
Agreement; provided, however, that Master Affiliate shall not assign its rights
or obligations hereunder to any Person that cannot demonstrate to the reasonable
satisfaction of both Master Affiliate and Muzak that (i) such Person has the
general business experience and financial resources necessary to conduct the
business licensed hereunder, and (ii) such Person will not be in a position to
use the information obtained as a licensee of Muzak in a manner that will be
harmful to Muzak either inside or outside the Licensed Area. An assignment of a
Party's rights hereunder shall not become effective until written notice has
been given to the other Party hereto and shall in no case affect or limit
obligations and liabilities of the assignor incurred, relating to, or arising
out of events occurring prior to such assignment.
12. DEFAULT AND TERMINATION
-----------------------
12.1 Automatic: A Party shall be deemed to be in default under this
---------
Agreement, and all rights granted herein shall automatically terminate without
notice to that Party, if that Party shall become insolvent or makes a general
assignment for the benefit of creditors; or if a petition in bankruptcy is filed
by that Party or such a petition is filed against and not opposed by that Party;
or if that Party is adjudicated as bankrupt or insolvent; or if a bill in equity
or other proceeding for the appointment of a receiver of that Party or other
custodian for
39
<PAGE>
that Party's business or assets is filed and consented to or not opposed by that
Party; or if a receiver or other custodian (permanent or temporary) of that
Party's assets or property, or any part thereof, is appointed by any court of
competent jurisdiction; or if proceedings for a composition or arrangement with
creditors under any provincial or national law should be instituted by or
against that Party; or if a final judgment affecting a material portion of that
Party's assets remains unsatisfied or of record or unsecured by payment into
court for thirty (30) days or longer; or if that Party is wound up, liquidated
or dissolved; or if execution is levied against a material portion of that
Party's business or property; or if the real or personal property of that Party
used in connection with the business contemplated by this Agreement shall be
foreclosed or sold after levy thereupon.
12.2 Non-Curable: A Party shall be deemed to be in default and the other
-----------
Party may, at its option, terminate this Agreement, without affording the
defaulting Party any opportunity to cure the default, effective immediately upon
receipt of written notice by the defaulting Party, upon the occurrence of any of
the following events:
12.2.1 If a Party at any time ceases to operate or otherwise abandons
the business contemplated by this Agreement.
12.2.2 If a principal of a Party is convicted of an indictable
criminal offense, a crime involving moral turpitude, fraud, or any other crime
or offense that the other Party
40
<PAGE>
reasonably believes is likely to have an adverse effect on the benefits to be
derived by that Party hereunder.
12.2.3 If, contrary to the terms of Article 14 hereof, a Party
discloses or divulges Confidential Information provided by the other Party, and
the other Party is damaged thereby.
12.2.4 If any representation made by a Party herein is found to be
untrue when and as made and the other Party has been damaged thereby.
12.2.5 If a Party knowingly maintains false books or records or
submits any false reports to the other Party.
12.2.6 If a Party repeatedly is in default under Section 12.3 hereof
for failure substantially to comply with any of the requirements imposed by this
Agreement, whether or not cured after notice.
12.3 Curable: Except as provided in Sections 12.1 and 12.2 of this
-------
Agreement, a Party shall have thirty (30) days after its receipt from the other
Party of a written notice of termination within which to remedy any default
hereunder (or, if the default cannot reasonably be cured within such thirty (30)
days, to initiate within that time substantial and continuing action to cure the
default) and to provide evidence thereof. If any such default is not cured
within that time (or, if appropriate, substantial and continuing action to cure
the default is not initiated within that time), or such longer period as
applicable law may require, this Agreement shall terminate without further
notice to the defaulting Party effective immediately upon expiration of the
thirty (30) day period or such longer period as
41
<PAGE>
applicable law may require. A Party shall be in default hereunder for any
failure to comply substantially with any of the requirements imposed by this
Agreement or to carry out the terms of this Agreement in good faith. Such
defaults shall include, without limitation, the occurrence of any of the
following events:
12.3.1 If a Party at any time loses the right to do or transact the
business licensed hereunder in Canada.
12.3.2 If a Party fails, refuses, or neglects promptly to pay when
due any monies owing to the other Party or its subsidiaries or affiliates, or to
submit the financial or other information required hereunder.
12.3.3 If a Party fails, refuses or neglects to reasonably comply
with the standards or procedures prescribed herein.
12.3.4 If a Party fails, refuses, or neglects to obtain the other
Party's prior written approval or consent as required by this Agreement.
12.3.5 If Master Affiliate engages in any business or markets any
service or product under a name or mark which is confusingly similar to the
Proprietary Marks.
12.3.6 If a Party, by act or omission, permits a continued violation
in connection with the operation of the business licensed hereunder of any law,
ordinance, rule, by-law or regulation of a governmental body or agency in
Canada, in the absence of a good faith dispute over its application or legality
42
<PAGE>
and without promptly resorting to an appropriate administrative or judicial
forum for relief therefrom.
12.4 Proprietary Marks: If Master Affiliate misuses or makes any
-----------------
unauthorized use of the Proprietary Marks or, without derogating from any right
of Master Affiliate set forth in this Agreement, otherwise materially impairs
the goodwill associated therewith, Master Affiliate shall have thirty (30) days
after its receipt from Muzak of a written notice of termination within which to
remedy such default (or, if such default cannot reasonably be cured within such
thirty (30) days, to initiate within that time substantial and continuing action
to cure the default) and to provide evidence thereof. If any such default is
not cured within that time (or, if appropriate, substantial and continuing
action to cure the default is not initiated within that time), or such longer
period as applicable law may require, this Agreement shall terminate without
further notice to Master Affiliate effective immediately upon expiration of the
thirty (30) day period or such longer period as applicable law may require.
12.5 Force Majeure: Neither Muzak nor Master Affiliate shall have any
-------------
liability to the other as a result of the failure of either Party to perform its
obligations hereunder, nor shall such failure be considered a breach of this
Agreement, if such failure is due to fire, flood, other act of God or the
elements, strike or other event or situation beyond the control of such Party
acting in accordance with sound business practices,
43
<PAGE>
including, without limitation, an event described in Section 3.5.2.
13. OBLIGATIONS UPON TERMINATION OR EXPIRATION
------------------------------------------
Upon termination or expiration of this Agreement:
13.1. Master Affiliate shall cease conducting its business under or using
the Distribution System and shall cease using the Proprietary Marks for any
purposes whatsoever.
13.2 Muzak shall immediately pay any and all sums owing to Master
Affiliate under this Agreement and Master Affiliate shall immediately pay any
and all sums owing to Muzak under this Agreement, including, without limitation,
payment of royalty fees and other charges for the period from the date covered
by its last payment to the date of termination.
13.3 Master Affiliate shall forthwith assign to Muzak, and Muzak shall
assume, all of Master Affiliate's right, title, interest, and obligations in and
to the Affiliate Agreements entered into between Muzak, Master Affiliate and the
Affiliates to the extent that the same shall arise, accrue at, or relate to any
time after the termination or expiration of this Agreement (the "Assignment
Date"). In the event that Master Affiliate should fail to execute any such
assignment to Muzak, then Master Affiliate hereby irrevocably nominates,
constitutes and appoints the person serving from time to time as the Secretary
of the General Partner of Muzak to be its attorney-in-fact to execute in Master
Affiliate's name or on its behalf any such assignment, and to execute all such
other documents and instruments and to carry out all such other acts and deeds
as may be reasonably required
44
<PAGE>
in order to perfect any such assignment. Master Affiliate shall remain liable
and shall indemnify Muzak for any and all claims, demands, actions, causes of
action, suits, proceedings, damages, losses, liabilities, charges, fines,
penalties, costs and expenses (including, without limitation, attorneys' fees
and court costs) ("Claims") relating to or arising from performance of (or
failure to perform) the obligations of Master Affiliate under the Affiliate
Agreements prior to the Assignment Date. Muzak shall indemnify Master Affiliate
for any and all Claims relating to or arising from performance of (or failure to
perform) those obligations of Master Affiliate under the Affiliate Agreements
after the Assignment Date that Muzak is required to assume by this Section 13.3.
14. MASTER AFFILIATE'S CONTRACTUAL OBLIGATIONS
------------------------------------------
14.1 Master Affiliate's Contractual Obligations: Muzak acknowledges that
------------------------------------------
Master Affiliate currently offers certain subscription music services in Canada
and that Master Affiliate currently has certain contractual obligations with
respect thereto. Accordingly, notwithstanding any other section in this
Agreement, the Parties expressly agree that this Agreement shall not be
interpreted to prohibit Master Affiliate from fulfilling such contractual
obligations (which contractual obligations as now existing or subsequently
renewed are herein identified as the "Contractual Obligations"); provided
however, that Master Affiliate covenants that during the term of this Agreement,
except as otherwise approved in writing by Muzak, Master Affiliate shall not,
either directly or indirectly, for itself,
45
<PAGE>
or through, on behalf of, or in conjunction with any person or entity:
14.1.1 Without derogating from the rights of Master Affiliate under
Section 5.3 above, divert or attempt to divert any existing or prospective
Subscriber in the Licensed Area to any competitor, by direct or indirect
inducement or otherwise, or do or perform, directly or indirectly, any other act
injurious or prejudicial to the goodwill associated with the Distribution
System, the Proprietary Marks, or the Services;
14.1.2 Be or become a party to any contract, agreement, mortgage,
lease, or instrument of any nature (except as provided in Section 14.2 of this
Agreement) which may conflict with, or be breached by, the execution and/or
performance of this Agreement; or
14.1.3 Participate either directly or indirectly (except as provided
in Section 14.2 of this Agreement) in the distribution in the Licensed Area of
any communications service substantially similar to the Adjunct Services, other
than the Adjunct Services, or any subscription music program service, other than
the Music Services, including, without limitation, a radio program service which
is provided through special reception devices tuned only to that station's
signal; provided, however, that if, as a result of Master Affiliate's
-------- -------
acquisition of another music business or the assets thereof during the term of
this Agreement, Master Affiliate becomes the assignee of a customer agreement
for such other music or communications services or an agreement under which
Master Affiliate is the distributor of such
46
<PAGE>
other music or communications services and Master Affiliate cannot substitute
the Services for such other services without causing a breach of such agreement,
Master Affiliate may provide such other services to the customers receiving such
services on the date of assignment through the remaining term (without reference
to renewal rights, unless such renewal rights are automatically exercisable by
the other party without the consent of Master Affiliate, in which case the term
of such agreement shall include such renewal term) of such agreement. Indirect
participation shall include, without limitation, participation by Master
Affiliate or any officer, director or manager of operations of Master Affiliate
who, in each case, is directly involved in the business of Master Affiliate's
Satellite Music Business Division as an officer, director, owner (which term
shall not include the holder of 2-1/2% or less of the common stock of a
publicly-held entity), partner, employee, joint venturer or consultant (with
respect to such services) of an entity distributing in the Licensed Area such
other communications or subscription music program service.
14.2 Contractual Obligations: Subsections 14.1.2 and 14.1.3 shall not
-----------------------
apply to any subscription music program services continued to be provided by
Master Affiliate to customers receiving such subscription music program services
as of the date of this Agreement pursuant to its Contractual Obligations.
14.3 Confidential Information: Each of the Parties covenants that it
------------------------
shall keep confidential any confidential information relating to the other
Party's businesses, including,
47
<PAGE>
without limitation, that relating to finances, marketing, technology, customer
lists and accounting records to which it obtains access, and that it will take
all reasonable precautions to protect such confidential information of the other
Party or any part thereof from any use, disclosure or copying except as
expressly authorized by this Agreement. The Parties shall divulge such
confidential information only to their employees, and to the Affiliates, to the
extent they must have access to it in order to operate the business contemplated
by this Agreement and the Affiliate Agreements. For the purposes of this
Section, "confidential information" means all data and information which when it
is disclosed to the other Party is designated as confidential; provided,
however, that confidential information shall not include any data or information
which (A) is or becomes publicly available through no fault of the Party
claiming the benefit of this exemption, (B) is already in the possession of such
Party prior to its receipt from the other Party, (C) is independently developed
by the Party claiming the benefit of this exemption, (D) is rightfully obtained
by such Party from a third party, (E) is disclosed with the written consent of
the Party whose information it is, or (F) is disclosed pursuant to court order
or other legal compulsion.
14.4 Other Personnel: Muzak and Master Affiliate may each request the
---------------
other to require their respective personnel having access to any of the
confidential information of the other party to execute covenants that they will
maintain the confidentiality of such information they receive in connection with
their
48
<PAGE>
employment. Such covenants shall be in such form as is satisfactory to both
Master Affiliate and Muzak, acting reasonably.
14.5 Covenants Independent: The parties agree that the foregoing
---------------------
covenants shall be construed as independent of any other covenant or provision
of this Agreement. If all or any portion of a covenant in this Article 14 is
held unreasonable or unenforceable by a court or governmental body or agency
having valid jurisdiction in an unappealed final decision, each Party expressly
agrees to be bound by any lesser covenant subsumed within the terms of such
covenant that imposes the maximum duty permitted by law, as if the resulting
covenant were separately stated in and made a part of this Article 14.
14.6 Irreparable Injury: Each Party acknowledges that its violation of
------------------
the terms of this Article 14 will result in irreparable injury to the other
Party for which no adequate remedy at law or in equity may be available, and
accordingly agrees that the other Party may seek to obtain the issuance of an
injunction prohibiting any conduct by such Party in violation of the terms of
this Article 14.
14.7 Covenants From Others: At Muzak's written request, Master Affiliate
---------------------
shall in good faith request execution of covenants similar to those set forth in
Section 14.1 (including, without limitation, covenants applicable upon the
termination of a person's relationship with Master Affiliate for so long as this
Agreement remains in effect) from any or all of the persons described in
subsection 14.1.3 above. Every covenant obtained
49
<PAGE>
pursuant to this Section 14.7 shall be in a form satisfactory to Muzak, acting
reasonably.
15. FEES, TAXES, AND PERMITS
------------------------
15.1 Performance Fees: Master Affiliate shall promptly pay when due all
----------------
music performance fees due to appropriate performing rights organizations for
performance of the Services.
15.2 Taxes:
-----
15.2.1 Any and all governmental charges relating to or arising out of
this Agreement, or any amendment hereto, in the form of registration fees,
surtax, stamp duties, or other governmental rates, taxes (other than income
taxes), or charges of any nature whatsoever shall be paid (1) by Master
Affiliate when such charges are due under any national or local law of Canada,
and (2) by Muzak when such charges are due under any federal, state or local law
of the United States of America. Any income taxes or withholding taxes which are
the debt of Muzak under any national or local law of Canada or under The Canada-
U.S. Tax Treaty on any fees paid to it by Master Affiliate under this Agreement
shall be withheld by Master Affiliate to the extent required by law, and Master
Affiliate shall provide proof to Muzak of its withholding and payment of any
such taxes. Such withholding and payment of taxes on behalf of Muzak shall
constitute payment to Muzak of the amounts so withheld and paid.
15.2.2 Master Affiliate hereby acknowledges, covenants and agrees
that all monies required to be paid by Master Affiliate to Muzak under or
pursuant to this Agreement constitute the full amounts owing and to be paid to
Muzak, net of any goods
50
<PAGE>
and services taxes or other similar taxes which are or may at any time become
exigible or payable in connection therewith. It is understood and hereby agreed
between the parties that Master Affiliate is and shall at all times be and
remain responsible and liable to pay the full amount of any such taxes in the
manner and at the times at which the said taxes are required to be paid pursuant
to applicable law, and as payment over and above the amounts required to be paid
by Master Affiliate to Muzak under or pursuant to this Agreement and that Muzak
shall remit to Her Majesty in right of Canada in the manner and at the times
required pursuant to applicable law, any such taxes which are collected by Muzak
as agent of Her Majesty in right of Canada and shall provide to Master Affiliate
proof of such payment.
15.3 Comply with Laws: Each Party shall comply with all laws, rules,
----------------
regulations, bylaws and ordinances applicable to it, and shall timely obtain any
and all permits, certificates, or licenses which are necessary for it to fully
and properly carry out its obligations under this Agreement, including, without
limitation, broadcasting permits, zoning permits, licenses to do business,
fictitious name registrations, sales tax permits, goods and services tax
registrations, and fire clearances.
15.4 Notice of Suit: Each Party shall notify the other in writing within
--------------
five (5) days after any Responsible Person of such Party, acting reasonably,
becomes aware of the commencement of any action, suit, or proceeding, or of the
issuance of any order, writ, injunction, award, or decree of any court, agency,
or other governmental instrumentality, which is reasonably likely to
51
<PAGE>
adversely affect the operation or financial condition of the business licensed
hereunder.
16. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
------------------------------------------
16.1 No Fiduciary Relationship: It is understood and agreed by the
-------------------------
Parties hereto that this Agreement does not create a fiduciary relationship
between them; that Master Affiliate shall be an independent contractor; and,
that nothing in this Agreement is intended to constitute either Party an agent,
legal representative, subsidiary, joint venturer, partner, employee, associate,
beneficiary or servant of the other for any purpose whatsoever.
16.2 Representations by Master Affiliate: Master Affiliate represents
-----------------------------------
that Master Affiliate's execution of this Agreement will not constitute a breach
of Master Affiliate's Contractual Obligations, as defined in Section 14.1 of
this Agreement.
16.3 Authority and Indemnification: It is understood and agreed that
-----------------------------
nothing in this Agreement authorizes either Party to make any contract,
agreement, warranty, or representation on the other Party's behalf, or to incur
any debt or other obligation in the other Party's name. In no event shall a
Party, as a result of the license relationship of the Parties under this
Agreement, be liable to any third party by reason of any act or omission of the
other Party or its officers, partners, directors, employees, agents, legal
representatives, joint venturers or servants (without any fault by such first-
mentioned Party) and, accordingly, each Party shall indemnify the other Party or
its officers, partners, directors, employees, agents, legal
52
<PAGE>
representatives, joint venturers or servants with respect to all third-party
Claims relating to or arising from any such act or omission of the indemnifying
Party or its officers, partners, directors, employees, agents, legal
representatives, joint venturers or servants without any fault by the
indemnified Party.
17. APPROVALS AND WAIVERS
---------------------
17.1 Request for Approval: Whenever this Agreement requires the prior
--------------------
approval or consent of the other Party, such Party shall make a timely written
request to the other Party, and such approval or consent shall be obtained in
writing.
17.2 No Implied Waivers: Except with respect to those modifications which
------------------
this Agreement provides may be made unilaterally by Muzak, this Agreement shall
not be modified, amended, rescinded, canceled or waived in whole or in part,
except by written instrument signed by the Parties and no waiver of any of the
provisions of this Agreement shall constitute a waiver or novation of any of the
other provisions hereof (whether or not similar) nor shall any waiver constitute
a continuing waiver unless expressly so provided therein.
18. NOTICES
-------
Any notice required or permitted to be given hereunder shall be considered
given if written, delivered in person, and acknowledged by the receiving Party,
or if sent by registered, prepaid mail or telecopy addressed to the address or
number below or such other address or number as the addressee may have given to
that other Party in writing from time to time:
53
<PAGE>
if to Muzak:
MUZAK LIMITED PARTNERSHIP
400 North 34th Street
Suite 200
Seattle, WA 98103
Attn: President
Telecopy Number: 206-633-6216
if to Master Affiliate:
CHUM LIMITED
1331 Yonge Street
Toronto, Ontario
M4T IYI
Attn: the President
Telecopy Number: 416-926-4026
with a copy to:
CHUM SATELLITE BUSINESS MUSIC DIVISION
87 Steelcase Road West
Markham, Ontario
L3R 2M4
Attn: Mr. Wally West, Sr.
Telecopy Number: 416-475-1664
Any notice delivered to the Party to whom it is addressed as provided herein
shall be deemed to have been given and received on the day it is so delivered at
such address, provided that if such day is not a Business Day, then the notice
shall be deemed to have been given and received on the next Business Day. Any
notice transmitted by telecopier shall be deemed given and received on the day
of its transmission if such day is a Business Day and if not on the next
Business Day. Business Day means any day other than a Saturday, Sunday or
statutory or civic holiday in the place of delivery (i.e., Toronto, Ontario or
Seattle, Washington, as the case may be).
54
<PAGE>
19. ENTIRE AGREEMENT
----------------
This Agreement, including all exhibits hereto, together with the agreements
and other documents to be delivered pursuant hereto, constitute the entire
agreement between the Parties pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties.
20. SEVERABILITY AND CONSTRUCTION
-----------------------------
20.1 Each Part Severable: Except as expressly provided to the contrary
-------------------
herein, each portion, section, part, term, and/or provision of this Agreement
shall be considered severable; and if, for any reason, any portion, section,
part, term, and/or provision herein is determined to be invalid and contrary to,
or in conflict with, any existing or future law or regulation by a court or
agency having valid jurisdiction, such shall not impair the operation of, or
have any other effect upon, such other portions, sections, parts, terms, and/or
provisions of this Agreement as may remain otherwise intelligible; and the
latter shall continue to be given full force and effect and bind the Parties
hereto; and said invalid portions, sections, parts, terms, and/or provisions
shall be deemed not to be a part of this Agreement.
20.2 No Implied Rights: Except as expressly provided to the contrary
-----------------
herein, nothing in this Agreement is intended, nor shall be deemed, to confer
upon any person or legal entity other than the Parties and their respective
officers, directors,
55
<PAGE>
partners, and employees any rights or remedies under or by reason of this
Agreement.
21. MISCELLANEOUS
-------------
21.1 Choice of Law: This Agreement shall be interpreted and construed
-------------
under the laws of the State of Washington, United States of America, which laws
shall prevail in the event of any conflict of law; except to the extent that any
matter in question involves the operation of this Agreement in the province of
Alberta, in which event, the laws of the province of Alberta, Canada shall
prevail in the event of any conflict of law.
21.2 Choice of Forum: Master Affiliate agrees that any action brought by
---------------
Master Affiliate against Muzak shall be brought in the United States in the
judicial district in which Muzak has its principal place of business. Muzak
agrees that any action brought by Muzak against Master Affiliate pursuant to
this Agreement shall be brought in a court of competent jurisdiction in the
province of Ontario, Canada. In the event that any action to be brought
pursuant to this Agreement by one party hereto against the other involves the
operation of this Agreement in the province of Alberta, Canada, the parties
hereto hereby agree that such action will be brought in a court of competent
jurisdiction in the province of Alberta.
21.3 Survival: It is agreed that the provisions of Sections 6.2.3, 6.2.4,
--------
6.5.2, 14.3, 16.3, and 21.5 and Articles 9 and 13 shall remain in force and
effect after the termination or expiration of this Agreement, until such time as
the Parties may mutually agree to the release of the obligations contained
56
<PAGE>
herein, it being agreed that Muzak's obligation to defend any claims, suits or
demands pursuant to Section 6.2.3 hereof shall only remain in force and effect
after the termination of this Agreement insofar as such claims, suits or demands
relate to Master Affiliate's or an Affiliate's use of the Proprietary Marks
during the term of this Agreement.
21.4 Injunctive Relief: Nothing herein contained shall bar a party's
-----------------
right to seek to obtain injunctive relief against threatened conduct in
violation of this Agreement that will cause it loss or damages, under the usual
equity rules, including, without limitation, the applicable rules for obtaining
restraining orders and preliminary injunctions.
21.5 Legal Fees: If any action or proceeding is brought for the
----------
enforcement of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable legal fees and disbursements and other
costs incurred in the action or proceeding, in addition to any other relief to
which it or they may be entitled.
21.6 Power of Attorney: In accordance with the Power of Attorney
-----------------
legislation applicable to this Agreement, Master Affiliate hereby declares that
the Powers of Attorney herein granted shall continue unrevoked and may be
exercised during any subsequent legal incapacity on the grantor's part. Master
Affiliate further hereby allows, ratifies and confirms all actions taken by
Muzak or on its behalf under or in pursuance of the authority herein conferred
upon it by the granting herein of such powers of attorney. As Master Affiliate
is a corporation,
57
<PAGE>
Master Affiliate further hereby waives any provisions of any such Power of
Attorney legislation applicable hereto requiring the affixing of the common seal
of the corporation hereto in order for the powers of attorney granted herein to
be valid, and in any event this Agreement shall be treated as between the
parties hereto for all purposes as if the common seal of Master Affiliate has
been duly and validly affixed hereto under the hands and in the presence of its
duly authorized and appointed officer or officers in that behalf.
21.7 Time is of the Essence: Time shall be of the essence for all
----------------------
purposes of this Agreement.
21.8 Language: The parties hereto agree that they expressly require that
--------
the Agreement to be entered into between them, together with all related
documents, all be drawn up, executed and distributed in the English language
only. Les parties aux presentes conviennent expressement que le Contract qu'ils
concluront entre eux, ainsi que tous les documents connexes ou qui s'y
rattachent, soient entierement rediges, signes et distribues en Anglais
seulement.
21.9 Binding Effect: This Agreement shall enure to the benefit of and be
--------------
binding upon the parties hereto and their respective estates, legal
representatives, successors and permitted assigns, as the case may be.
22. ACKNOWLEDGMENTS
---------------
22.1 Independent Investigation: Each of the Parties acknowledges that it
-------------------------
has conducted an independent investigation and has had the opportunity to
receive legal advice from counsel
58
<PAGE>
of its own choosing and recognizes that the business venture contemplated by
this Agreement involves business risks and that its success will be largely
dependent upon the ability of each Party as an independent person or entity.
Muzak and Master Affiliate expressly disclaim the making of, and Muzak and
Master Affiliate acknowledge that neither has received, any representation,
promise, warranty or guarantee, express or implied, as to the potential volume,
profits, or success of the business venture contemplated by this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and
delivered this Agreement on the day and year first above written.
MUZAK LIMITED PARTNERSHIP
a Delaware limited partnership
By: [SIGNATURE ILLEGIBLE]
------------------------------
Title: President
---------------------------
MASTER AFFILIATE
CHUM LIMITED
By: [SIGNATURE ILLEGIBLE]
------------------------------
Title: President
---------------------------
59
<PAGE>
Exhibit 10.16
<PAGE>
================================================================================
[LOGO] FEDERAL COMMUNICATIONS COMMISSION
PRIVATE OPERATIONAL FIXED MICROWAVE RADIO STATION LICENSE
================================================================================
<TABLE>
<S> <C> <C> <C> <C>
LICENSEE ASSOCIATED BROADCAST FILE NUMBER CALL SIGN
STATION
MUZAK LIMITED PARTNERSHIP 9507717536 WPJA293
2901 THIRD AVE SUITE 400 -------------------------------------------------------------------------
SEATTLE WA 98121 RADIO SERVICE STATION CLASS
BUSINESS OPERATIONAL FIXED
-------------------------------------------------------------------------
EFFECTIVE CONSTRUCTION EXPIRATION
DATE DATE DATE
09/06/1995 09/06/1996 09/06/2000
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL CONDITIONS OF GRANT:
MULTIPLE ADDRESS SYSTEM WITH MASTER STATIONS ON 956.4125 AND 956.4375 AT STATED COORDINATES AND REMOTE RECEIVE ONLY STATIONS.
====================================================================================================================================
SITES
====================================================================================================================================
TRANSMITTER STREET ADDRESS COUNTY CITY STATE
211 NW MILLER RD MULTNOMAH PORTLAND OR
SITE LATITUDE LONGITUDE DATUM ELEVATION TIP HEIGHT ANTENNA PAINTING & LIGHTING CODES
NO (FT) (FT) FCC FORM 715/715A
001 45-31-22.0 N 122-45-07.0 W N27 968 1081 1, 3, 8, 17, 21, 22
====================================================================================================================================
FREQUENCY PATHS
====================================================================================================================================
FREQUENCY AND POWER INFORMATION PATH SEGMENT INFORMATION
====================================================================================================================================
FREQUENCY TOLERANCE EMISSION EIRP SEG EMIT ANT BEAM- HTxWD POL AZIM RECEIVER
(MHZ) (%) DESIGNATOR (DBM) NO SITE HGT WIDTH (FT) (DEG) SITE CALL SIGN
OR CHANNEL NO (FT) (DEG) NO
000956.412500 0.00015 16K0F3E 53.0 0001 1 001 495 OMNI V OMNI
000956.437500 0.00015 16K0F3E 53.0 0002 1 001 495 OMNI V OMNI
</TABLE>
================================================================================
Page: 1 OF 1
<PAGE>
================================================================================
[LOGO] FEDERAL COMMUNICATIONS COMMISSION
PRIVATE OPERATIONAL FIXED MICROWAVE RADIO STATION LICENSE
================================================================================
<TABLE>
<S> <C> <C> <C> <C>
LICENSEE ASSOCIATED BROADCAST FILE NUMBER CALL SIGN
STATION
MLP COMMUNICATIONS COMPANY 9506716637 WNTV211
2901 THIRD AVE SUITE 400 -------------------------------------------------------------------------
SEATTLE WA 98121 RADIO SERVICE STATION CLASS
BUSINESS OPERATIONAL FIXED
-------------------------------------------------------------------------
EFFECTIVE CONSTRUCTION EXPIRATION
DATE DATE DATE
08/08/1995 08/08/1996 09/23/1999
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL CONDITIONS OF GRANT:
MULTIPLE ADDRESS SYSTEM AUTHORIZED FOR ONE-WAY COMMUNICATIONS TO REMOTE RECEIVE ONLY STATIONS.
====================================================================================================================================
SITES
====================================================================================================================================
TRANSMITTER STREET ADDRESS COUNTY CITY STATE
MT WILSON APPROX 7 MI NE OF LOS ANGELES PASADENA CA
SITE LATITUDE LONGITUDE DATUM ELEVATION TIP HEIGHT ANTENNA PAINTING & LIGHTING CODES
NO (FT) (FT) FCC FORM 715/715A
001 34-13-32.0 N 118-03-52.0 W N27 5678 522 NONE
====================================================================================================================================
FREQUENCY PATHS
====================================================================================================================================
FREQUENCY AND POWER INFORMATION PATH SEGMENT INFORMATION
====================================================================================================================================
FREQUENCY TOLERANCE EMISSION EIRP SEG EMIT ANT BEAM- HTxWD POL AZIM RECEIVER
(MHZ) (%) DESIGNATOR (DBM) NO SITE HGT WIDTH (FT) (DEG) SITE CALL SIGN
OR CHANNEL NO (FT) (DEG) NO
000956.287500 0.00015 25K0F3E 53.0 0001 1 001 105 OMNI V OMNI
</TABLE>
================================================================================
Page: 1 OF 1
<PAGE>
===============================================================================
<TABLE>
<CAPTION>
FEDERAL COMMUNICATIONS COMMISSION LICENSEE
GETTYSBURG, PA 17325
MLP COMMUNICATIONS COMPANY
MICROWAVE RADIO STATION LICENSE [LOGO APPEARS HERE]
- ------------------------------------------------------------------------------------ CENTRE PARTNERS
CALL SIGN FILE NUMBER LICENSEE IDENTIFICATION NUMBER 1 ROCKEFELLER PLZ STE 1025
WNTF298 782743 005473-000 NEW YORK
- ------------------------------------------------------------------------------------ NY 10020
EFFECTIVE DATE EXPIRATION DATE
JULY 24, 1992 JULY 24, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LOCATION OF TRANSMITTING ANTENNA CITY COUNTY STATE
PRUDENTIAL CENTER TOWER BOSTON SUFFOLK MA
- ------------------------------------------------------------------------------------------------------------------------------------
OVERALL HEIGHT OF LATITUDE LONGITUDE ANTENNA PAINTING AND LIGHTING SPECIFICATIONS, FCC FORM 715, PARAGRAPHS:
ANTENNA STRUCTURE 909 FT 42 20 50 N 71 04 59 W 01.0 03.0 21.0
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL CONDITIONS
MULTIPLE ADDRESS SYSTEM WITH MASTER STATION ON 956.3875 AT STATED COORDINATES AND REMOTE RECEIVE
ONLY STATIONS
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNICAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
PATH FREQUENCY EIRP BEAMWIDTH AZIMUTH HGT TO CTR ANTENNA FREQUENCY
NO. (MHZ) (DBM) (DEG) (DEG) OF RADIATING EMISSION POLARIZATION TOLERANCE
ELEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
001 956.38750 56.0 360.0 OMNI 780 FT 16F3 V .00015
</TABLE>
PAGE 1
===============================================================================
<PAGE>
===============================================================================
<TABLE>
<CAPTION>
FEDERAL COMMUNICATIONS COMMISSION LICENSEE
GETTYSBURG, PA 17325
MLP COMMUNICATIONS COMPANY
MICROWAVE RADIO STATION LICENSE [LOGO APPEARS HERE]
- ------------------------------------------------------------------------------------ CENTRE PARTNERS
CALL SIGN FILE NUMBER LICENSEE IDENTIFICATION NUMBER 1 ROCKEFELLER PLZ STE 1025
WNEZ752 782744 005473-000 NEW YORK
- ------------------------------------------------------------------------------------ NY 10020
EFFECTIVE DATE EXPIRATION DATE
JULY 24, 1992 JULY 24, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LOCATION OF TRANSMITTING ANTENNA CITY COUNTY STATE
211 NW MILLER RD PORTLAND MULTNOMAH OR
- ------------------------------------------------------------------------------------------------------------------------------------
OVERALL HEIGHT OF LATITUDE LONGITUDE ANTENNA PAINTING AND LIGHTING SPECIFICATIONS, FCC FORM 715, PARAGRAPHS:
ANTENNA STRUCTURE 1081 FT 45 31 22 N 122 45 07 W 01.0 03.0 08.0 17.0 21.0
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL CONDITIONS
MULTIPLE ADDRESS SYSTEM WITH MASTER STATION ON 928.9625 & 928.9875 AT STATED COORDINATES AND
REMOTE RECEIVE ONLY STATIONS
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNICAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
PATH FREQUENCY EIRP BEAMWIDTH AZIMUTH HGT TO CTR ANTENNA FREQUENCY
NO (MHZ) (DBM) (DEG) (DEG) OF RADIATING EMISSION POLARIZATION TOLERANCE
ELEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
001 928.93750 47.0 360.0 OMNI 495 FT 16F3 V .00015
</TABLE>
PAGE 1
================================================================================
<PAGE>
===============================================================================
<TABLE>
<CAPTION>
FEDERAL COMMUNICATIONS COMMISSION LICENSEE
GETTYSBURG, PA 17325
MLP COMMUNICATIONS COMPANY
MICROWAVE RADIO STATION LICENSE [LOGO APPPEARS HERE]
- ------------------------------------------------------------------------------------ CENTRE PARTNERS
CALL SIGN FILE NUMBER LICENSEE IDENTIFICATION NUMBER 1 ROCKEFELLER PLZ STE 1025
WNTL507 783385 005473-000 NEW YORK
- ------------------------------------------------------------------------------------ NY 10020
EFFECTIVE DATE EXPIRATION DATE
AUGUST 4, 1992 AUGUST 4, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LOCATION OF TRANSMITTING ANTENNA CITY COUNTY STATE
CEDAR SQ MINNEAPOLIS HENNEPIN MN
W 1615 4TH ST
- ------------------------------------------------------------------------------------------------------------------------------------
OVERALL HEIGHT OF LATITUDE LONGITUDE ANTENNA PAINTING AND LIGHTING SPECIFICATIONS, FCC FORM 715, PARAGRAPHS:
ANTENNA STRUCTURE 374 FT 44 58 14 N 93 14 53 W NONE
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL CONDITIONS
MULTIPLE ADDRESS SYSTEM WITH MASTER STATION ON 959.9625 AT STATED COORDINATES AND REMOTE
RECEIVE ONLY STATIONS
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNICAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
PATH FREQUENCY EIRP BEAMWIDTH AZIMUTH HGT TO CTR ANTENNA FREQUENCY
NO (MHZ) (DBM) (DEG) (DEG) OF RADIATING EMISSION POLARIZATION TOLERANCE
ELEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
001 959.96250 56.0 360.0 OMNI 368 FT 16F3 V .00015
</TABLE>
PAGE 1
===============================================================================
<PAGE>
===============================================================================
<TABLE>
<CAPTION>
FEDERAL COMMUNICATIONS COMMISSION LICENSEE
GETTYSBURG, PA 17325
MLP COMMUNICATIONS COMPANY
MICROWAVE RADIO STATION LICENSE [LOGO APPEARS HERE]
- ------------------------------------------------------------------------------------ CENTRE PARTNERS
CALL SIGN FILE NUMBER LICENSE IDENTIFICATION NUMBER 1 ROCKEFELLER PLZ STE 1025
WNEZ751 782742 005473-000 NEW YORK
- ------------------------------------------------------------------------------------ NY 10020
EFFECTIVE DATE EXPIRATION DATE
JULY 24, 1992 JULY 24, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LOCATION OF TRANSMITTING ANTENNA CITY COUNTY STATE
FRANCHER MEM AIRWAY BEACON SPOKANE SPOKANE WA
AIRWAY BEACON HILL
- ------------------------------------------------------------------------------------------------------------------------------------
OVERALL HEIGHT OF LATITUDE LONGITUDE ANTENNA PAINTING AND LIGHTING SPECIFICATIONS, FCC FORM 715, PARAGRAPHS:
ANTENNA STRUCTURE 60 FT 47 41 40 N 117 20 01 W 01.0 02.0
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL CONDITIONS
MULTIPLE ADDRESS SYSTEM WITH MASTER STATION ON 928.9875 & 928.9125 AT STATED COORDINATES AND
REMOTE RECEIVE ONLY STATIONS.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNICAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
PATH FREQUENCY EIRP BEAMWIDTH AZIMUTH HGT TO CTR ANTENNA FREQUENCY
NO (MHZ) (DBM) (DEG) (DEG) OF RADIATING EMISSION POLARIZATION TOLERANCE
ELEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
001 928.98750 47.0 360.0 OMNI 55 FT 16F3 V .0001
002 928.91250 47.0 360.0 OMNI 55 FT 16F3 V .0001
</TABLE>
PAGE 1
===============================================================================
<PAGE>
Exhibit 10.17
<PAGE>
[ ]
MUZAK(R)
LICENSE AGREEMENT
Dated ___________________________
<PAGE>
MUZAK(R)
LICENSE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
I. GRANT OF LICENSE .................................................... 3
1.1 As to Services .............................................. 3
1.2 As to Proprietary Marks ..................................... 4
1.3 Rights Retained ............................................. 4
II. PROVISION OF SERVICES .............................................. 5
2.1 Services .................................................... 5
2.2 Satellite-Delivered Services ................................ 6
2.3 Delivery by Recorded Media .................................. 9
2.4 Adjunct Services ............................................ 10
2.5 Alternate Delivery Means .................................... 10
2.6 Service Delivery Equipment .................................. 11
III. TERM .............................................................. 12
3.1 Term ........................................................ 12
3.2 Renewal of Rights ........................................... 12
3.3 Notice from Licensee ........................................ 16
IV. EXCLUSIVITY ........................................................ 17
4.1 In the Territory ............................................ 17
4.2 Future Services ............................................. 17
4.3 No Other Services ........................................... 18
4.4 Promotion of All Services ................................... 20
V. STANDARDS OF SERVICE AND TRAINING ................................... 21
5.1 Operations in General ....................................... 21
5.2 Sales ....................................................... 22
5.3 Protection of Services ...................................... 23
5.4 Training .................................................... 24
5.5 Confidentiality ............................................. 24
VI. FEES AND ROYALTIES ................................................. 26
6.1 Initial Fee ................................................. 26
6.2 Market Fee .................................................. 27
6.3 Royalty Fee ................................................. 28
6.4 DBS Surcharge ............................................... 28
6.5 Recorded Media Charges ...................................... 29
6.6 Adjunct Services Charges .................................... 29
6.7 Payment Schedule............................................. 29
6.8 Gross Billings............................................... 30
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
VII. RECORDS, REPORTS, AND INSPECTIONS ................................. 31
7.1 Records ..................................................... 31
7.2 Reports ..................................................... 32
7.3 Audit ....................................................... 32
VIII. MARKETING AND PROMOTION .......................................... 35
8.1 Advertisements .............................................. 35
8.2 Yellow-Pages Advertising .................................... 36
8.3 Additional Assistance by Muzak .............................. 36
IX. MULTI-TERRITORY ACCOUNTS PROGRAM; CABLE RADIO/TV ................... 36
X. DEFAULT AND TERMINATION OF THIS AGREEMENT ........................... 38
10.1 Default of Licensee ......................................... 38
10.2 Default of Muzak ............................................ 41
10.3 Additional Remedies ......................................... 42
10.4 Force Majeure ............................................... 43
XI. RELATIONSHIP OF THE PARTIES UPON TERMINATION OR
EXPIRATION OF THIS AGREEMENT ....................................... 43
11.1 Action Required of Licensee ................................. 43
11.2 Action Required of Muzak .................................... 44
XII. TRANSFER OF BUSINESS OR CONTROL OF LICENSEE ....................... 45
12.1 By Licensee and its Owners .................................. 45
12.2 Consent of Muzak ............................................ 45
12.3 Collateral .................................................. 47
12.4 Transfer to Family Member ................................... 48
12.5 By Muzak .................................................... 48
XIII. PROPRIETARY MARKS ................................................ 48
13.1 Ownership ................................................... 48
13.2 Infringement ................................................ 49
13.3 Use ......................................................... 49
13.4 Substitution of Proprietary Marks ........................... 50
XIV. MISCELLANEOUS ..................................................... 51
14.1 Representations of Licensee ................................. 51
14.2 Representations of Muzak .................................... 51
14.3 Independent Contractor ...................................... 52
14.4 Release ..................................................... 52
14.5 No Waiver ................................................... 53
14.6 Notices ..................................................... 54
14.7 Entire Agreement ............................................ 55
14.8 Severability ................................................ 55
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
14.9 Captions .................................................... 55
14.10 Binding Effect .............................................. 56
14.11 Counterparts ................................................ 56
14.12 Attorney's Fees.............................................. 56
14.13 Applicable Law............................................... 56
14.14 All Remedies................................................. 56
14.15 Limitation................................................... 57
14.16 No Warranties................................................ 57
14.17 No Implied Rights............................................ 58
14.18 Survival..................................................... 58
14.19 Conversion .................................................. 59
14.20 Most Favorable Terms ........................................ 59
XV. ACKNOWLEDGEMENTS.................................................... 60
15.1 Independent Investigations.................................... 60
15.2 Disclosure.................................................... 60
15.3 Opportunity to Review......................................... 61
</TABLE>
EXHIBITS
- --------
Exhibit A - Music Services
Exhibit B - Adjunct Services (Music-Related and Other)
Exhibit C - Marks
Exhibit D - Technical Specifications
Exhibit E - Sales of Adjunct Services
Exhibit F - Adjunct Services Revenue Sharing
Exhibit G - MUZAK(R) Multi-Territory Accounts Program
Exhibit H - Agreements Not To Be Superseded
iii
<PAGE>
MUZAK(R)
LICENSE AGREEMENT
THIS MUZAK(R) LICENSE AGREEMENT ("Agreement") is made and entered into this
_______ day of ___________________________, 19____, by and between MUZAK LIMITED
PARTNERSHIP, a Delaware limited partnership ("Muzak"), and
____________________________ ___________________________ ("Licensee").
RECITALS:
--------
WHEREAS, Muzak has developed and owns a system (the "Muzak System") for the
production and delivery to licensees and subscribers of licensees of
subscription music services, adjunct communications services, and related
equipment, which system currently includes Muzak's unique software control
system for satellite distribution of multiple program services;
WHEREAS, the characteristics of the Muzak System also include, without
limitation, subscription music services, with certain unique and varied program
contents developed using distinctive and, in some cases, proprietary program-
scheduling techniques, which are set forth in Exhibit A attached hereto and
incorporated herein by reference (the "Music Services"); distinctive adjunct
services relating to the sequencing, changing, and switching of music-program
communications (the "Music-Related Adjunct Services") and to the delivery of
advertising, data and
1
<PAGE>
video communications (the "Other Adjunct Services"), (collectively the "Adjunct
Services"), which are set forth in Exhibit B attached hereto and incorporated
herein by reference; and delivery methods and procedures for both the Music
Services and the Adjunct Services (jointly, the "Services");
WHEREAS, Muzak identifies the Muzak System and the Services by means of
certain trade names, service marks, trademarks, logos, emblems, and indicia of
origin, including but not limited to the mark "MUZAK(R)," and such other trade
names, service marks, and trademarks as are set forth on Exhibit C attached
hereto and incorporated herein by reference (the "Proprietary Marks"), which
Proprietary Marks represent Muzak's high standards of quality and service; and
WHEREAS, Licensee desires to market and distribute the Services to
customers (the "Subscribers") who enter into agreements providing for receipt of
the Services at certain locations (the "Subscriber Premises"), and wishes to
obtain a license for that purpose from Muzak;
NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments of each party to the other party set forth herein, hereby agree as
follows:
2
<PAGE>
I. GRANT OF LICENSE
----------------
1.1 As to Services.
--------------
(a) Subject to the terms and conditions herein contained, Muzak hereby
grants to Licensee an exclusive license, and Licensee hereby agrees, to engage
in the business of providing the Services to Subscribers at Subscriber Premises
located solely within the following areas (such areas being hereinafter referred
to as the "Territory"): _______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
______________________________________________________. Except as specifically
authorized by the Multi-Territory Sales Committee in connection with the Multi-
Territory Accounts Program as described in Article IX below and Exhibit G
attached hereto, or by Muzak in connection with certain Adjunct Services sales
as described in Exhibit E attached hereto, Licensee shall not provide the
Services to Subscriber Premises located outside the Territory.
(b) Licensee and Muzak recognize that some outlying areas of the
Territory may at some future date be more efficiently served by a Muzak licensee
who operates in a territory adjoining the Territory. Licensee therefore shall
have the right at any time to present to Muzak a written request for
3
<PAGE>
reallocation of such outlying areas of the Territory to an adjoining licensee.
Any such reallocation shall be effective upon the written consent thereto of
both Muzak and the adjoining licensee. Muzak's consent shall not be
unreasonably withheld.
1.2 As to Proprietary Marks. Subject to the terms and conditions herein
-----------------------
contained, Muzak grants to Licensee, and Licensee accepts, a license to use the
Proprietary Marks solely in connection with Licensee's provision of the Services
as provided in this Agreement. Licensee shall at all times seek to market and
sell the Services through use of the Proprietary Marks.
1.3 Rights Retained. The grant of rights in Sections 1.1 and 1.2 above
---------------
does not include the grant of the following rights, which are retained by Muzak:
(a) The right to use, and to license others to use, the Muzak System
and the Proprietary Marks for the provision of the Services to Subscriber
Premises which are located outside the Territory.
(b) The right to provide the Services, and to use the Proprietary
Marks in connection therewith, to transportation common carriers (including,
without limitation, operators of automobiles, ships, airplanes, trains, or
buses) which sell or
4
<PAGE>
provide transportation common carrier services, in whole or in part, within the
Territory, it being understood that the reservation of such right shall not be
construed as limiting Licensee's right to provide the Services to transportation
common carriers located wholly within the Territory.
(c) The right to provide a foreground music service by Recorded Media
(as hereinafter defined) under the "YESCO(R)" name and trademark to existing
dealers of the "YESCO(R)" Foreground Music Service and their customers pursuant
to existing contractual obligations or agreements with such dealers; provided,
however, that Muzak shall not authorize such dealers to distribute any of the
Services or use the Proprietary Marks within the Territory.
II. PROVISION OF SERVICES
---------------------
2.1 Services. Muzak shall supply Licensee with the Services for and
--------
during the term hereof, for use by Licensee solely in accordance with the terms
of this Agreement. Muzak reserves the right to add a Service and, except with
respect to the "Environmental Music by MUZAK(R)" and the "Foreground Music
One(R)" Music Services, to substitute a different Service or discontinue the
distribution of a Service, if Muzak reasonably determines that such addition,
substitution, or discontinuation will be beneficial to its business and the
business of its
5
<PAGE>
licensees in general and gives Licensee at least six (6) months' prior notice of
such addition, substitution or discontinuation. Any such addition, substitution
or discontinuation will be reflected in an amendment of Exhibit A or Exhibit B,
as the case may be, and will not affect the validity of this Agreement, which
shall, in all respects, be deemed modified to provide for such addition,
substitution, or discontinuation.
2.2 Satellite-Delivered Services.
----------------------------
(a) Subject to Section 2.3, Licensee agrees to deliver the Music
Services to Subscribers by such means as meet the standards and technical
specifications set forth in Exhibit D attached hereto and incorporated herein by
reference and the other terms and conditions of this Agreement. Muzak may
modify the standards and specifications set forth in Exhibit D from time to time
if Muzak reasonably believes that such modifications are necessary to maintain
or improve the quality of delivery of the Services to Subscribers or to maintain
or improve the effectiveness or quality, or reduce the price, of the Service
Delivery Equipment (as hereinafter defined); provided, however, that no such
modifications shall have the effect of rendering the satellite receivers and
associated antennae (collectively, the "Earth Stations") then in use by Licensee
or Subscribers in the Territory incapable of receiving satellite transmissions,
or any other equipment then in use by Licensee or Subscribers in the
6
<PAGE>
Territory for the reception of the Services incapable of receiving the Services,
unless such modifications are necessitated by law or by the exercise of the
rights of third parties under the express terms of Muzak's satellite-space
contracts; and provided further, that Muzak shall provide Licensee with six (6)
months' prior notice of any changes to those standards and specifications in
Exhibit D that pertain to the Service Delivery Equipment and Licensee's
obligations under Section 2.6 below.
(b) In the event that the Services are delivered by "Direct-Broadcast
Satellite" ("DBS"), which permits the satellite transmission of Services by
Muzak directly to the premises of a Subscriber, the following shall apply:
(i) Muzak shall, promptly after receipt of written notice from
Licensee, commence DBS delivery of the Services to Subscribers who have
Earth Stations suitable for receipt of such delivery. Subject to the
provisions of Exhibits E and G hereto, if Muzak delivers Services by DBS
directly to the Subscriber Premises, Muzak shall not discontinue such
delivery until the earlier of the following: (A) the date which Licensee
designates, or (B) one hundred eighty (180) days after the effective date
of the termination or expiration (without renewal of license rights) of
this Agreement. In the event Muzak discontinues
7
<PAGE>
delivery of Services in violation of this subsection (b)(i), Muzak agrees
to the granting of a temporary injunction against it on the condition that
the duration of such injunction does not exceed ten (10) days. Such
injunction may be granted on an ex parte basis if Muzak fails to appear at
-- -----
the hearing following twelve (12) hours' notice by telephone to the twenty-
four (24) hour telephone number of the Muzak DBS Division. During the ten
(10) day temporary injunction period, Licensee may seek to have such
temporary relief converted to a permanent injunction in a hearing on the
merits following appropriate notice to Muzak.
(ii) During the above-referenced 180-day (or shorter, if
Licensee so designates) period, Licensee shall remain obligated to perform
the duties and be subject to the restrictions applicable to it under the
terms of this Agreement with respect to such continuing DBS delivery of the
Services, including without limitation those terms which obligate Licensee
to pay royalties, fees, charges, and surcharges (but only with respect to
Gross Billings [as hereinafter defined] and fees and charges to Subscribers
served by means of DBS), but not including terms which require Licensee to
pay a market fee or which restrict Licensee from offering or selling the
services of others. During such 180-day (or shorter) period, under no
circumstances shall Licensee use the Proprietary Marks
8
<PAGE>
except as necessary in association with the continuing provision of the
Services by DBS to Subscribers. In addition, during such period Muzak
shall not be precluded from appointing one or more distributors of the
Services in the Territory and from giving to such distributors any rights
previously accorded to Licensee under this Agreement or any related
agreement.
2.3 Delivery by Recorded Media. Certain Services, as reasonably
--------------------------
designated by Muzak, may be delivered by means of, among other things, magnetic
tape or compact disc, in analog or digital form (the "Recorded Media"). Muzak
shall at all times retain title to, and all ownership rights in, any Recorded
Media, whether furnished to Licensee or to a Subscriber. Licensee shall not
sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise
encumber any Recorded Media. Licensee shall (i) prohibit all Subscribers who
receive Services delivered by Recorded Media from selling, assigning,
transferring, conveying, giving away, pledging, mortgaging, or otherwise
encumbering any of such Recorded Media, (ii) promptly notify Muzak in the event
it becomes aware that any Subscriber has violated any such prohibition, (iii)
cooperate with Muzak in the immediate termination of the provision of Services
to any Subscriber which has violated any such prohibition, and (iv) take such
further action as is requested by Muzak (at Muzak's expense) to enforce such
prohibition.
9
<PAGE>
2.4 Adjunct Services. All sales of the Adjunct Services shall be
----------------
conducted in the manner provided in Exhibit E attached hereto and incorporated
herein by reference.
2.5 Alternate Delivery Means. In the event of a failure of Muzak's
------------------------
satellite transmissions of the Services, Muzak shall use its reasonable best
efforts promptly to restore such transmissions. In addition, by no later than
30 days after the date of this Agreement, Muzak shall provide Licensee with tape
cassettes (or other form of Recorded Media) containing 72 hours of
"Environmental Music by MUZAK(R)" programming and 72 hours of "Foreground Music
One(R)" programming, at no cost to Licensee, which Licensee shall retain for
emergency use in the event of a failure of Muzak's satellite transmissions of
the Music Services. Should any such failure of satellite transmissions continue
for a period in excess of 48 hours, Muzak shall use its reasonable best efforts
promptly to provide Licensee with additional tape cassettes (or other form of
Recorded Media), at no cost to Licensee, to be used until such failure has been
corrected. All Recorded Media provided to Licensee or to Subscribers under the
terms of this Section 2.5 shall be subject to all other provisions of this
Agreement pertaining to Recorded Media, including, without limitation, Section
2.3.
10
<PAGE>
2.6 Service Delivery Equipment.
--------------------------
(a) Licensee, at its expense (except as provided in subsection (b)
below), shall obtain and maintain equipment (including, without limitation,
Earth Stations) to enable Licensee to receive and distribute the Services and
shall obtain and make available to the Subscribers equipment to enable the
Subscribers to receive the Services. (All equipment used to receive or
distribute the Services, including such equipment as is owned by Subscribers, is
hereinafter collectively referred to as the "Service Delivery Equipment.") The
Service Delivery Equipment, except Subscriber-owned equipment that is not sold
to the Subscriber by Licensee, shall conform to Muzak's standards and
specifications in effect on the date Licensee installs such Equipment at the
Subscriber Premises. The standards and specifications in effect as of the date
hereof are attached hereto in Exhibit D.
(b) Muzak shall, at no cost to Licensee, provide Licensee with two
(2) Earth Stations for Licensee's use (at such locations in the Territory as
Licensee determines) in receiving the Services during the term of this
Agreement. Muzak shall at all times retain title to, and all ownership rights
in, the Earth Stations that it provides to Licensee, and Licensee shall not
under any circumstances sell, assign, transfer, convey, give away, pledge,
mortgage, or otherwise encumber such Earth
11
<PAGE>
Stations. Licensee shall, at Muzak's expense (except with respect to the
obtaining of any required permits, which shall be at Licensee's expense up to
$500 per Earth Station), install the Earth Stations which Muzak provides to
Licensee, and shall, at its own expense, maintain such Earth Stations in good
working condition; provided, however, that in the event any Earth Station
provided to Licensee is, through no negligent or intentional act or failure to
act of Licensee, defective or in need of replacement parts or repair, Muzak,
after receipt of notice thereof, shall promptly provide or arrange for such
replacement parts and repair as are necessary to restore such Earth Station to
good working order.
III. TERM
----
3.1 Term. Except as otherwise provided herein, the term of this Agreement
----
shall begin as of the date set forth in the introductory paragraph of this
Agreement and shall continue in full force and effect for a period of ten (10)
years from such date.
3.2 Renewal of Rights.
-----------------
(a) If Muzak reasonably determines that the performance of Licensee
during the term stated in Section 3.1 is not sufficiently satisfactory to
warrant renewal of Licensee's
12
<PAGE>
license rights hereunder, then, at least two years prior to the date of
expiration described in Section 3.1 of this Agreement, Muzak shall notify
Licensee that it does not intend to renew Licensee's license rights and provide
the specific reasons for such decision. Such notification is intended to give
Licensee the opportunity to assign its rights under this Agreement, or to make
satisfactory its performance, it being understood that any such assignment is
subject to Muzak's prior approval as provided in Article XII hereof.
(i) In determining whether or not to renew Licensee's license
rights, Muzak shall consider Licensee's performance under this Agreement.
In evaluating Licensee's performance, Muzak shall consider such factors as,
among others, the following: Licensee's total billings for all Services,
the trend of Licensee's new billings and cancellations (and the reasons
therefor), local market conditions and the degree of Licensee's market
penetration in the Territory.
(ii) In the event Muzak notifies Licensee that Muzak does not
intend to renew Licensee's license rights because Muzak has reasonably
determined that Licensee's performance is not sufficiently satisfactory to
warrant renewal of Licensee's license rights hereunder, Licensee shall have
a period of six months from the date of such
13
<PAGE>
notice to attempt to improve its performance. At the end of such six-month
period, Muzak shall reconsider the adequacy of Licensee's performance and
if such performance has sufficiently improved so that it is no longer
inadequate, Muzak shall rescind its notice of intention not to renew
Licensee's license rights. Conversely, if at the end of such six-month
period Muzak determines that Licensee's performance remains inadequate,
Muzak shall inform Licensee of the reasons for such determination and send
to Licensee a final notice of nonrenewal.
(b) Muzak shall also have the right not to renew Licensee's license
rights if Licensee engages in conduct which Muzak reasonably deems inimical to
the best interests of the Muzak System (including the interests of the MUZAK(R)
licensees in such System). The exercise of Muzak's rights as stated in this
subsection (b) shall be subject to the following conditions:
(i) In the event such conduct constitutes a breach of this
Agreement, Muzak shall have the absolute right not to renew Licensee's
license rights, provided that Muzak has notified Licensee of such breach,
such breach occurred (or Muzak first became aware of such breach) no more
than six months before Muzak's nonrenewal notice to Licensee, and Licensee
has neither cured nor challenged such breach within the period specified in
Section 10.1(c)
14
<PAGE>
hereof, and provided further that Muzak's nonrenewal notice to Licensee
states that it constitutes a final notice of nonrenewal; and
(ii) In the event that such conduct does not constitute a breach
of this Agreement, Muzak shall notify Licensee within 90 days of its
discovery of the objectionable conduct that it considers such conduct to be
inimical to the best interests of the Muzak System (including the interests
of the MUZAK(R) licensees in such System). If, after two such notices,
Licensee again engages in conduct which Muzak reasonably deems to be
inimical to the best interests of the Muzak System (including the interests
of the MUZAK(R) licensees in such System), then (whether or not such
conduct is similar to the conduct referred to in either of the earlier
notices) Muzak may notify Licensee of that fact and of the further fact
that as a result of such conduct, it does not intend to renew Licensee's
license rights. This notice shall constitute a final notice of nonrenewal.
(c) In the event that, in accordance with the provisions of this
Section 3.2, Muzak notifies Licensee of its intention not to renew Licensee's
license rights, then Muzak shall have no obligation to offer to renew such
license rights; provided, however, that if, in the case of the final nonrenewal
15
<PAGE>
notice sent pursuant to subparagraph (a) or subparagraph (b)(ii) above, Licensee
challenges, by litigation commenced no later than 120 days after the date of
such final nonrenewal notice, the propriety of such notice, such notice shall
become effective only after such litigation is finally resolved in favor of
Muzak. It is understood and agreed that Licensee's right to challenge the final
nonrenewal notice sent under subparagraph (b)(i) of this Section 3.2 shall be
exercised, if at all, by means of Licensee's challenge under Section 10.1 of
this Agreement of the breach supporting such nonrenewal. For purposes hereof,
final resolution shall include Licensee's failure to make a timely appeal of a
court decision in favor of Muzak. If Muzak does not so notify Licensee, then
Muzak shall be required to offer to enter into a new license agreement with
Licensee upon expiration of this Agreement, which new license agreement shall
correspond to the form of license agreement which Muzak is then bona fide
offering to licensees (or prospective licensees) serving (or proposing to serve)
licensed territories of comparable size to that proposed to be licensed to
Licensee under such new agreement.
3.3 Notice from Licensee. Notwithstanding Section 3.2, Muzak shall have
--------------------
no obligation to offer to renew Licensee's license rights unless, after written
notice from Muzak sent to Licensee no less than eight (8) and no more than
twelve (12) months prior to the date of expiration described in Section 3.1
16
<PAGE>
of this Agreement advising Licensee of the effect of this Section 3.3, Licensee
shall have given Muzak written notice of its desire to renew its license rights
not less than six (6) months nor more than twelve (12) months prior to the date
of expiration described in Section 3.1 of this Agreement.
IV. EXCLUSIVITY
-----------
4.1 In the Territory. Subject to the provisions of Sections 1.3 and 2.4
----------------
(including Exhibit E hereto) above, Article IX below (including Exhibit G
hereto), and the Licensee's In-Store Advertising Agreement described in Exhibit
H attached hereto, during the term of this Agreement, Muzak shall not authorize
anyone other than Licensee to (i) provide the Services in the Territory or (ii)
use the Proprietary Marks in the Territory.
4.2 Future Services. Muzak shall conduct research and development to
---------------
maintain and improve the quality of the Services and the methods used to
distribute them. In the event that Muzak develops new subscription music
services, or new communications services in the nature of the Adjunct Services,
after the date hereof, Muzak shall amend Exhibit A or Exhibit B, as the case may
be, in the manner provided in Section 2.1 above (including the requirement of at
least six months' prior notice to Licensee of such amendment) to add such new
Services thereto, thereby giving
17
<PAGE>
Licensee the right and, subject to Exhibit E hereto, the obligation to
distribute such Services in the Territory under the terms of this Agreement.
4.3 No Other Services. During the term of this Agreement, except as
-----------------
otherwise approved in writing by Muzak, neither Licensee nor any of the persons
or entities holding (either directly, indirectly, or beneficially) a controlling
ownership interest in Licensee shall, either directly or indirectly, for itself,
or through, on behalf of, or in conjunction with any person or entity:
(a) Participate or permit any of its employees, officers, or
directors to participate, either directly or indirectly in the distribution in
the Territory of any communications service substantially the same as or similar
to the Adjunct Services (except a communications service distributed by any such
person or entity pursuant to a contract or agreement in effect on the date the
Adjunct Service which is the same as or similar to such communications service
is first offered to Licensee by Muzak), or any subscription music service other
than the Music Services, including, without limitation, a radio program service
which is provided through special reception devices tuned only to that station's
signal and any music programming that is provided to commercial or residential
locations by means of cable television or cable radio; provided,
--------
18
<PAGE>
however, that the foregoing shall not become effective with respect to such
- -------
other subscription music services that are distributed by Recorded Media until
the later of (i) January 1, 1993, (ii) the first date Licensee may cancel or
otherwise terminate the agreement under which Licensee is the distributor of
such other music services without causing a breach of such agreement (provided
such agreement was in effect on March 1, 1990), or (iii) with reference to the
distribution of such music services to any particular customer, the first date
Licensee may either substitute the Music Services for such other music services
or cancel or terminate the agreement with such customer without causing a breach
of such agreement (provided such customer agreement was in effect on September
1, 1990); and provided further, that if, as a result of Licensee's acquisition
-------- -------
of another music business or the assets thereof during the term of this
Agreement, Licensee becomes the assignee of a customer agreement for such other
music or communications services or an agreement under which Licensee is the
distributor of such other music or communications services and Licensee cannot
substitute the Services for such other services without causing a breach of such
agreement, Licensee may provide such other services to the customers receiving
such services on the date of assignment through the remaining term (without
reference to renewal rights) of such agreement. Indirect participation shall
include participation as an officer, director, owner (which term shall not
include the holder of 5% or less of the common stock of a
19
<PAGE>
publicly-held entity), partner, employee, or consultant of an entity
distributing such other communications or subscription music service.
(b) Divert or permit any of its employees, officers, or directors to
divert any existing or prospective Subscriber to any competitor in the
Territory, by direct or indirect inducement or otherwise, or do or perform,
directly or indirectly, any other act injurious or prejudicial to the goodwill
associated with Muzak, the Proprietary Marks, or the Services.
(c) Display in any location in the Territory any trade names,
trademarks, or service marks of any other business providing subscription music
services or providing communications services substantially similar to the
Adjunct Services except if permitted to sell or distribute such services in the
Territory pursuant to Paragraph (a) above.
4.4 Promotion of All Services. Throughout the term of this Agreement,
-------------------------
Licensee shall use its reasonable best efforts actively to promote, market, and
distribute each of the Services (except as otherwise provided in Article 4 of
Exhibit E hereto).
20
<PAGE>
V. STANDARDS OF SERVICE AND TRAINING
---------------------------------
5.1 Operations in General. In order to maintain the reputation and
---------------------
goodwill of Muzak, the Services, and the Proprietary Marks, Licensee shall:
(a) Comply with all federal, state, and local laws, rules and
regulations, and timely obtain all permits, certificates, and licenses,
necessary in the reasonable judgment of Licensee for the proper conduct of the
business licensed hereunder (the "Business").
(b) Maintain an office in the Territory and promptly notify Muzak in
the event Licensee moves the office to a new location within the Territory;
provided, however, that if Licensee is also the Muzak licensee in a territory
adjacent to the Territory and maintains an office in that territory that
adequately serves Subscribers in both such territories, Licensee need not
maintain an office in the Territory.
(c) Be responsible for paying for all performing rights licenses
necessary for the distribution of the Services; provided, however, that Muzak
shall be responsible for paying for the license with SESAC to the extent
required for Licensee's distribution of the Services.
21
<PAGE>
(d) Be responsible for paying all applicable local, state and federal
taxes of whatever nature, now or hereafter enacted, relating to Licensee's
provision of the Services, and all accounts and other indebtedness of every kind
incurred by Licensee in the conduct of the Business.
(e) Hold itself out to the public as an independent contractor,
operating under a license from Muzak. In the event Licensee elects to exhibit
the MUZAK(R) name on its stationery or vehicles, such exhibition shall be in a
conspicuous place and only in juxtaposition with Licensee's corporate name.
5.2 Sales. Licensee (or, if Licensee is a corporate or partnership
-----
entity, those individuals responsible for managing the Business) shall devote
full-time and reasonable best efforts to the sale, distribution, and support of
all the Services (it being understood that such obligation shall not be
construed as prohibiting Licensee from selling goods and services in addition to
the Services, provided such sale does not violate Section 4.3 above, or
requiring Licensee to sell certain Adjunct Services as described in Article 4 of
Exhibit E hereto). Without limiting the generality of the foregoing, prior to
the beginning of each consecutive twelve (12)-month period during the term of
this Agreement, with the first such period to begin on the first anniversary of
the date of this Agreement, Muzak and Licensee shall mutually set a Services
sales goal for Licensee. Such goal
22
<PAGE>
shall be based on the amount of Gross Billings, plus the amount of billings for
the sale of Recorded Media and Adjunct Services, which Muzak and Licensee
mutually believe can be attained by Licensee during such twelve (12)-month
period, taking into consideration such factors as the size and other distinctive
characteristics of the Territory, the size and trend of Licensee's past Gross
Billings and other billings, Licensee's prior sales of each Service, and
economic conditions affecting the Territory. Licensee shall use its best
efforts to meet such sales goals during each respective twelve (12)-month
period.
5.3 Protection of Services. Licensee shall not alter in any way the
----------------------
Services or any products (including Service Delivery Equipment) owned by Muzak
and in the possession of Licensee. Without limiting the generality of the
foregoing, Licensee shall not substitute or add any musical selections or other
material in or to any Service (except in extraordinary circumstances, with the
prior written consent of Muzak, which in such circumstances shall not be
unreasonably withheld). Licensee shall not represent that any product or
equipment not produced by Muzak has been produced by Muzak; provided, however,
that the foregoing shall not preclude Licensee from displaying the MUZAK(R) name
on items not produced by Muzak, including promotional items, if Muzak has
authorized such display. Licensee shall report to Muzak any unauthorized
reception of the Services promptly after becoming aware of any such unauthorized
reception, and shall
23
<PAGE>
further cooperate with Muzak in protecting against and preventing the
unauthorized reception of the Services. Licensee shall not record, copy, or
reproduce all or any part of any Service and shall expressly prohibit, including
by written agreement if possible, Subscribers from recording, copying, or
reproducing all or any part of any Service.
5.4 Training. Muzak shall make available to Licensee and its employees
--------
training programs designed to maintain and improve Licensee's sales and delivery
of the Services; provided, however, that this obligation shall cease in the
event Muzak determines that such programs (or any sessions thereof) are not
cost-effective. For all such programs, Muzak shall provide instructors and
training materials, for which Muzak reserves the right to charge a reasonable
tuition fee. Licensee or its employees shall be responsible for any and all
other expenses incurred by them in connection with such training programs,
including without limitation the costs of transportation, lodging, meals, and
any wages.
5.5 Confidentiality. During the term of this Agreement and thereafter,
---------------
neither Muzak nor Licensee (including any persons or entities listed on the last
page of this Agreement) shall use for its own purposes or divulge to any third
party any trade secrets or confidential information of the other. As used
herein (i) the term "third party" shall not include any party otherwise lawfully
24
<PAGE>
in receipt of the trade secrets or confidential information to be divulged; or
any employee, attorney, accountant, or consulting engineer of Muzak or Licensee,
as the case may be, provided that such individual agrees not to further use or
disclose such trade secrets or confidential information; or any person or entity
providing credit or financing to Muzak or Licensee, as the case may be, provided
such person or entity (and any representative thereof) is similarly charged with
maintaining the confidence of such trade secrets and confidential information;
or any representative of a governmental authority or other person or entity to
whom disclosure is required by compulsion of law, provided notice of the demand
for such disclosure is given, within 48 hours of receipt of such demand, to the
party owning the confidential information or trade secrets required to be
disclosed; and (ii) the term "confidential information" means information
designated as such in writing by the party owning such information, as well as
customer lists and revenue data (without further designation), but does not
include information that has become part of the public domain through
publication or other similar communication. During the term of this Agreement
Muzak shall not require that Licensee disclose to Muzak the name and address of
any Subscriber other than (i) for the purpose of participation in the Multi-
Territory Accounts Program, (ii) to permit delivery of the Services under the
Licensee's In-Store Advertising Agreement, and (iii) to permit delivery of the
Services by such technological means as require such information
25
<PAGE>
for such delivery. Licensee understands and agrees that if Muzak is unable to
perform any of its obligations hereunder as a result of its inability to obtain
such Subscriber information, such nonperformance shall not be deemed a breach of
this Agreement.
VI. FEES AND ROYALTIES
------------------
6.1 Initial Fee. If this Agreement is entered into in connection with the
-----------
renewal or continuation (including amendments and adjustments of territories) of
rights granted under a prior agreement between Muzak (or its predecessor) and
Licensee (or its predecessor in the Territory), Licensee shall not be required
to pay any initial fee to Muzak. If this Agreement is not entered into in
connection with such renewal or continuation of rights granted under such a
prior agreement, Licensee shall pay to Muzak an initial fee of Five Thousand
Dollars, plus the amount, if any, paid by Muzak to purchase the rights of any
former licensee in the Territory in any Multi-Territory Contracts and certain
Adjunct Services Subscriber Agreements (as defined in Exhibits E and G hereto),
upon the opening of the business licensed hereunder. The initial fee shall be
deemed fully earned and nonrefundable upon the opening of the business licensed
hereunder and assignment of such subscriber contracts and agreements in
consideration of the administrative and other expenses incurred by Muzak in
granting this license to Licensee.
26
<PAGE>
6.2 Market Fee. Licensee shall pay to Muzak, in accordance with Section
----------
6.7 each calendar month, a market fee in the amount set forth below for Licensee
Category _____ and based upon information then available in the report entitled
County Business Patterns by State and a U.S. Summary, as published by the Bureau
- ----------------------------------------------------
of the Census, United States Department of Commerce or any successor publication
(the "U.S. Business Pattern Report") and, in the case of Category I below, the
population within the Territory.
<TABLE>
<CAPTION>
Licensee Number of Businesses and/or Monthly
Category Population Within Territory Market Fee
- -------- --------------------------- ----------
<S> <C> <C>
A 70,000 or more businesses $950
B 60,000 through 69,999 businesses 900
C 50,000 through 59,999 businesses 850
D 40,000 through 49,999 businesses 770
E 30,000 through 39,999 businesses 690
F 20,000 through 29,999 businesses 610
G 10,000 through 19,999 businesses 530
H 5,000 through 9,999 businesses 450
I ("Junior 4,999 or fewer businesses or 350
Franchise") population of 100,000 or less
</TABLE>
Upon a determination by Muzak, based upon the information then available in the
U.S. Business Pattern Report (or, in the case of Category I, the U.S. Census),
that the number of businesses or population within the Territory has changed so
as to require the recategorization of the Business, Muzak will so notify
Licensee. Any adjustment in the market fee resulting from such recategorization
shall become effective for the calendar month immediately following the month in
which such notice is given. Cumulative adjustments in the market fee during the
term of this
27
<PAGE>
Agreement shall not exceed two (2) categories from that shown above in this
Section 6.2.
6.3 Royalty Fee. Licensee shall pay to Muzak each month a royalty fee in
-----------
the amount of ten percent (10%) of Licensee's Gross Billings, as defined in
Section 6.8 below.
6.4 DBS Surcharge. In consideration of Muzak's development and
-------------
implementation of DBS, Licensee shall pay to Muzak a surcharge (the "DBS
Surcharge") throughout the term of this Agreement; provided, however, that
Licensee's obligation to pay the DBS Surcharge shall no longer exist after
Licensee (and/or any predecessor of Licensee in the Territory) has paid to Muzak
the DBS surcharge with respect to the Territory for a cumulative total of
ninety-six (96) consecutive calendar months (including any months preceding the
date of this Agreement during which Licensee [or its predecessor in the
Territory] paid such DBS Surcharge with respect to the Territory). The DBS
Surcharge shall be equal to the following percentage of Licensee's Gross
Billings:
28
<PAGE>
<TABLE>
<CAPTION>
Calendar Months
(Including any applicable DBS Surcharge
months preceding the date (Percentage of
of this Agreement) Gross Billings)
------------------------- ---------------
<S> <C>
1 through 12 0.50%
13 through 24 1.25%
25 through 60 1.75%
61 through 96 1.00%
thereafter 0.00%
</TABLE>
6.5 Recorded Media Charges. Licensee shall pay Muzak's standard Recorded
----------------------
Media charges, as the same may be set forth by Muzak from time to time in
writing, for all Recorded Media distributed to Licensee or the Subscribers.
Muzak shall not increase such Recorded Media charges prior to January 1, 1993,
and increases thereafter shall not exceed ten percent (10%) per annum.
6.6 Adjunct Services Charges. Licensee shall pay Muzak's Adjunct Services
------------------------
charges in accordance with the terms set forth in Exhibit F attached hereto and
incorporated herein by reference.
6.7 Payment Schedule. All monthly payments required by Sections 6.3 and
----------------
6.4 shall be paid within forty-five days of the end of the month in which the
applicable Services are provided to the Subscribers, and shall be submitted
together with any reports or statements required under Section 7.2 hereof. All
Market Fee charges required by Section 6.2, all Recorded Media charges required
by Section 6.5, and all Adjunct Services charges
29
<PAGE>
required by Section 6.6 shall be paid within forty-five days after the date of
Muzak's billing to Licensee. Any payment of fees due to Muzak that is not
actually received by Muzak by the due date shall be deemed overdue. If any
payment is deemed overdue, simple interest may be assessed on such overdue
payment. Such interest shall accrue on a daily basis from the due date until
the date of payment, at the lesser of (i) the prime rate of The First National
Bank of Chicago per annum in effect at the beginning of the calendar quarter, or
(ii) the highest rate of interest permitted by law in Licensee's State.
Entitlement to such interest shall not limit any other remedies available under
law or this Agreement as a result of the overdue payment.
6.8 Gross Billings. "Gross Billings" means all amounts billed or
--------------
otherwise charged to a Subscriber by Licensee in connection with (1) the
provision of any Music Service, and (2) the lease or rental (but not the sale)
of Service Delivery Equipment and other equipment used to receive and distribute
such Music Service but not including (i.e., excluding) equipment that is not
used primarily in the provision or reception of a Music Service.
Notwithstanding the foregoing, "Gross Billings" shall not include any amount
billed or otherwise charged to a Subscriber by Licensee for (a) the provision of
any Music Service on Recorded Media, (b) Music-Related Adjunct Services, or (c)
the lease or rental of any Service Delivery Equipment used with Recorded Media.
"Gross Billings" also shall not include (i) any
30
<PAGE>
amounts billed to Subscribers as (and separately stated on the billings or
otherwise separately determinable as) sales or similar excise taxes; (ii) one-
time installation charges billed not later than ninety (90) days following
completion of such installation; (iii) charges for service of Subscriber-owned
equipment, provided that such charges are separately determinable; (iv) ad hoc
(i.e., extraordinary) charges for service actually performed on Subscriber-
- -----
leased or Subscriber-owned equipment; and (v) late-payment penalties or interest
charges imposed by Licensee, provided that such penalties and charges do not
exceed standard industry practice. Licensee may deduct from its Gross Billings
(i) amounts paid by Licensee as performing rights fees to ASCAP, BMI, or similar
performing rights organizations with respect to the Music Services other than
those distributed by Recorded Media, and (ii) the amount of any billings that
were previously reported to Muzak as part of Licensee's Gross Billings but
which, in the month of the deduction, were written off by Licensee as
uncollectible in accordance with federal income tax standards of
uncollectibility.
VII. RECORDS, REPORTS, AND INSPECTIONS
---------------------------------
7.1 Records. Licensee shall prepare, and retain at its principal place of
-------
business for at least two (2) years thereafter, complete and accurate books,
records, and accounts of the Business. Such books, records, and accounts shall
fairly
31
<PAGE>
represent the results of operations of such business, as determined on an
accrual basis, and shall be kept in sufficient detail to permit the transactions
included in such operations to be clearly identifiable and traceable to
underlying documentation. Licensee shall make available such records and books
of account to Muzak or its representatives if requested by Muzak for inspection
and audit as provided in Section 7.3.
7.2 Reports. Licensee shall submit to Muzak, together with the payments
-------
described in Section 6.7, royalty and fees reports, in such detail as Muzak may
from time to time reasonably request, accurately reflecting all Gross Billings
during the periods to which such payments pertain.
7.3 Audit.
-----
(a) Muzak or its representatives may, upon giving Licensee 30 days'
(or 10 days' in the case of an audit following a request for Muzak's consent to
a transfer under Article XII hereof) written notice, enter the premises of
Licensee (and of any person doing business [an "affiliated person"] controlling,
controlled by or under common control with Licensee) during normal business
hours for inspection and audit of the business and records of Licensee and of
such affiliated person, provided that such inspection and audit shall be no more
extensive than is required to verify that none of Licensee's or such affiliated
32
<PAGE>
person's revenues should have been reported as Gross Billings or as charges for
Recorded Media and Adjunct Services and that Licensee's payments to Muzak have
been properly computed in accordance with the provisions of Article VI of this
Agreement. Licensee shall cooperate with any such inspection and audit. Muzak
shall not assess Licensee for amounts found, as a result of such audit, to be
owing hereunder if such amounts derive from a reporting period that ended more
than two years prior to the date such audit commenced, provided that Licensee
has not knowingly maintained false books or records, or knowingly submitted
false reports to Muzak.
(b) During any audit hereunder, Muzak or its representatives (at
Muzak's cost and expense) may make mechanical copies of only those books and
records of Licensee that are necessary for the verification of Licensee's
statements and accountings to Muzak and were physically examined as part of the
audit. Muzak shall take reasonable precautions to safeguard the confidentiality
of such copies and shall destroy any such copies upon the mutually-confirmed
completion of the audit and payment in full of any royalties and other charges
determined to be owing to Muzak as a result of the audit. Nothing contained
herein shall be construed as in any way limiting Muzak's right manually to copy
or make abstracts of Licensee's or any affiliated person's books and records or
to make any notes or the like whatsoever; provided, however, that such manual
copies or
33
<PAGE>
abstracts (and any copies thereof) shall be destroyed upon the mutually-
confirmed completion of the audit.
(c) In the event that any audit conducted by or on behalf of Muzak
results in a determination that there has been either an underpayment or
overpayment of the amounts due Muzak hereunder, then within 30 days after such
determination, Licensee or Muzak, as the case may be, shall pay to the other the
amount of such underpayment or overpayment; provided, however, that in the event
that Licensee disputes the results of any such audit, the parties shall attempt
to resolve the matter by conducting a new audit under the joint supervision of
their respective independent certified public accountants. In the event that
such new audit resolves the dispute, the cost of each party's independent
certified public accountants shall be borne by the respective party. In the
event that such new audit fails to resolve the dispute, the matter shall be
resolved by arbitration under the rules of the American Arbitration Association,
and the losing party shall pay both parties' entire costs of the second audit.
(d) If it is determined as a result of an audit that there has been
an underpayment of seventeen percent (17%) or more of the amounts due Muzak for
any given calendar year, Licensee shall pay to Muzak, within thirty (30) days
after such determination and in addition to all other amounts due under this
34
<PAGE>
Agreement, a penalty equal to fifteen percent (15%) of the underpayment for that
year. The foregoing remedies shall be in addition to any other remedies Muzak
may have for such underpayment.
(e) Muzak and Licensee shall confirm, at the conclusion of the audit
and following payment of any monies found owing as a result of the audit, that
such audit has been completed and that the periods audited shall not be audited
again absent a showing that Licensee knowingly maintained false books and
records for such period.
VIII. MARKETING AND PROMOTION
-----------------------
8.1 Advertisements. Licensee shall cooperate with any advertising or
--------------
promotional campaigns conducted by Muzak in accordance with sound business
practices. Licensee shall promptly discontinue any advertising or promotion
which Muzak informs Licensee is, in Muzak's judgment, inimical to Muzak's
reputation. Without limiting the generality of the foregoing, Licensee shall
submit to Muzak upon request samples of all advertising and promotional plans
and materials that Licensee proposes to use. Licensee shall amend any such
plans and materials as requested by Muzak upon receipt of notice from Muzak that
such plans or materials fail to comply with the requirements of this Section
8.1. In the event that Muzak notifies Licensee
35
<PAGE>
to amend any advertising or promotional plans previously approved by Muzak's
predecessors-in-interest, Licensee shall have up to 180 days after the date of
such notice to make such amendments.
8.2 Yellow-Pages Advertising. Each year during the term of this
------------------------
Agreement, Licensee shall ensure that it is listed in at least one "trademark
ad" under the appropriate classification in the yellow pages of one major-market
telephone book in the Territory. Muzak will reimburse Licensee for the annual
cost of one such "trademark ad" within thirty (30) days after receipt from
Licensee of the invoice for the advertisement.
8.3 Additional Assistance by Muzak. Within the limits of its available
------------------------------
personnel, Muzak, when so requested by Licensee, shall make available technical
and marketing assistance to Licensee. The charges for such assistance shall be
mutually agreed upon by the parties.
IX. MULTI-TERRITORY ACCOUNTS PROGRAM; CABLE RADIO/TV
------------------------------------------------
9.1 Multi-Territory Accounts Program. Recognizing that potential
--------------------------------
Subscribers with substantial numbers of Subscriber Premises located throughout
the United States represent a significant potential market for Licensee and
other Muzak licensees marketing the Services, and that the effective marketing
of the Services to such accounts frequently requires a
36
<PAGE>
coordinated effort by Muzak and its licensees, Muzak, in conjunction with a
Multi-Territory Sales Committee, shall establish and maintain during the term of
this Agreement a Multi-Territory Accounts Program. The Multi-Territory Accounts
Program and the Multi-Territory Sales Committee are more fully described in
Exhibit G attached hereto and incorporated herein by reference. Licensee and
Muzak agree to participate in the Multi-Territory Accounts Program as set forth
in Exhibit G and otherwise to abide by the terms of Exhibit G. Without limiting
the generality of the foregoing, Licensee agrees to participate during the term
of this Agreement in all Multi-Territory Contracts (as defined in Exhibit G)
that pertain to Subscriber Premises in the Territory.
9.2 Cable Radio/TV. In the event that (i) a provider of cable television
--------------
or cable radio programming requests that Muzak provide music for such
programming that cannot otherwise be provided by Licensee utilizing the Music
Services, and (ii) such programming will be distributed to residences (but not
to commercial locations) in the Territory, then prior to Muzak's providing such
music, Muzak and Licensee shall jointly determine their respective interests in
the revenues deriving from the provision of such music to such provider.
37
<PAGE>
X. DEFAULT AND TERMINATION OF THIS AGREEMENT
-----------------------------------------
10.1 Default of Licensee.
-------------------
(a) Licensee shall be deemed to be in default under this Agreement,
and all rights granted herein shall, at the option of Muzak, immediately
terminate upon notice thereof to Licensee (without opportunity to cure), if at
any time:
(i) Licensee shall file in any court pursuant to any statute
either of the United States or of any State a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or
trustee of all or a portion of Licensee's property, or if there is
commenced against Licensee any such petition which is not opposed by
Licensee or not dismissed within ninety days after such filing, or if
Licensee admits in writing its inability to pay its debts or makes a
general assignment for the benefit of creditors, or if Licensee makes
general application to Licensee's creditors to settle, compromise, or
extend the time of payment of all of Licensee's obligations; or
(ii) there occurs a voluntary or involuntary transfer or
purported transfer of an interest in Licensee or in this Agreement in
violation of Article XII.
38
<PAGE>
(b) Licensee shall be deemed to be in default under this Agreement,
and all rights granted herein shall terminate, if any of the following events
shall occur and not be cured, in the time and manner provided in subsection (c)
below, following notice thereof from Muzak:
(i) if Licensee fails to comply with any of its obligations
under this Agreement and Muzak has been or is reasonably likely to be in
any way damaged thereby, or if any representation made by Licensee herein
is found to be untrue when and as made and Muzak has been or is reasonably
likely to be in any way damaged thereby; or
(ii) if Licensee ceases to distribute the Music Services or
ceases to operate or otherwise abandons the Business; or
(iii) if Licensee loses the right to transact business in
any jurisdiction included in the Territory and Licensee refuses to
surrender to Muzak its license rights hereunder with respect to such
jurisdiction; or
(iv) if Licensee knowingly maintains false books or records,
or submits false reports to Muzak.
39
<PAGE>
(c) Licensee shall have thirty (30) days after its receipt from Muzak
of a written notice of default within which to remedy any default as defined in
subsection (b) above (or, if the default cannot reasonably be cured within such
thirty (30) days, to initiate within that time substantial and continuing action
to cure the default) and to provide evidence thereof to Muzak. If any such
default is not cured within that time (or, if appropriate, substantial and
continuing action to cure the default is not initiated within that time), or
such longer period as applicable law may require, this Agreement shall
terminate following Licensee's receipt of a Notice of Termination reciting
Licensee's failure to cure or commence to cure and setting forth a definite
termination date, which shall be no sooner than 5 business days following
Licensee's receipt of such Notice or such longer period as applicable law may
require; provided, however, that in the event the existence of such default is
disputed by Licensee, and Licensee notifies Muzak of such dispute within 10 days
after receipt of Muzak's notice of default and thereafter promptly proceeds to
take all steps necessary to resolve such dispute, including (if necessary) the
commencement of litigation by no later than 30 days after receipt of Muzak's
notice of default, such termination shall not become finally effective until 10
days after the date such dispute is finally resolved in favor of Muzak. For
purposes hereof, final resolution shall include without limitation Licensee's
failure to make a timely appeal of a court decision in favor of Muzak.
Notwithstanding anything in
40
<PAGE>
this paragraph (c) to the contrary, in the event that the final resolution in
favor of Muzak of Licensee's dispute of a notice of default is by means of a
court decision and such court also specifically decides that, at each successive
level of Licensee's legal challenge to the notice of default, Licensee had a
strong likelihood of success on the merits (without application by the court of
any balance-of-hardships tests), Licensee shall have 30 days from the date of
such final resolution to cure the default; in such event, if such cure is not
effectuated by the end of such 30-day period, the termination shall then become
immediately effective.
10.2 Default of Muzak. Muzak shall be deemed to be in default, and
----------------
Licensee shall have the right to terminate this Agreement, if Muzak fails to
comply with any of its obligations under this Agreement, and Licensee has been
or is reasonably likely to be in any way damaged thereby, and such failure is
not cured within thirty (30) days after Muzak's receipt of a written notice of
default from Licensee (or, if the default cannot reasonably be cured within such
thirty (30) days, if such cure has not been initiated and is not continuing
within that time); provided, however, that in the event the existence of such
default is disputed by Muzak, and Muzak notifies Licensee of such dispute within
10 days after receipt of Licensee's notice of default and thereafter promptly
proceeds to take all steps necessary to resolve such dispute, including (if
necessary) the
41
<PAGE>
commencement of litigation by no later than 30 days after receipt of Licensee's
notice of default, such termination shall not become effective until 10 days
after the date such dispute is finally resolved in favor of Licensee. For
purposes hereof, final resolution shall include Muzak's failure to make a timely
appeal of a court decision in favor of Licensee. Notwithstanding anything in
this Section 10.2 to the contrary, in the event that the final resolution in
favor of Licensee of Muzak's dispute of a notice of default is by means of a
court decision and such court also specifically decides that, at each successive
level of Muzak's legal challenge to the notice of default, Muzak had a strong
likelihood of success on the merits (without application by the court of any
balance-of-hardships tests), Muzak shall have 30 days from the date of such
final resolution to cure the default; in such event, if such cure is not
effectuated by the end of such 30-day period, the termination shall then become
immediately effective.
10.3 Additional Remedies. No termination of this Agreement shall affect
-------------------
any obligation, including any obligation arising as a result of a default of
this Agreement, of any party accrued up to the date of termination or limit any
additional rights or remedies provided the nondefaulting party under this
Agreement or under law.
42
<PAGE>
10.4 Force Majeure. Neither Muzak nor Licensee shall have any liability
-------------
to the other or to any other person as a result of the failure of either of such
parties to perform its obligations hereunder, nor shall such failure be
considered a breach of this Agreement, if such failure is due to fire, flood,
other act of God, strike or other event or situation beyond the control of such
party acting in accordance with sound business practices.
XI. RELATIONSHIP OF THE PARTIES UPON TERMINATION OR EXPIRATION OF THIS
------------------------------------------------------------------
AGREEMENT
---------
11.1 Action Required of Licensee. Upon termination or expiration (without
---------------------------
renewal of license rights) of this Agreement, Licensee shall, subject to Section
2.2(b), Section 2.4 (including Exhibit E), and Article IX (including Exhibit G),
immediately
(a) Cease to distribute the Services to Subscribers and shall not
thereafter, directly or indirectly, represent itself to the public or hold
itself out as a licensee of Muzak;
(b) Cease to use, in any manner whatsoever, the Services and the
Proprietary Marks. Without limiting the generality of the foregoing, Licensee
shall immediately cancel any assumed name or equivalent registration which
contains the mark "MUZAK(R)" or any other service mark or trademark of Muzak, or
otherwise permit Muzak to effect such cancellation;
43
<PAGE>
(c) Sell to Muzak at Licensee's cost of acquisition, if any, all
manuals, instructions, sales literature, and other materials related to the
Services or the Proprietary Marks and retain no copy or record of any of the
foregoing except Licensee's copies of this Agreement and any other document
which Licensee reasonably needs for compliance with specific provisions of state
or federal law;
(d) Dismantle (if necessary) and dispose of as Muzak requests (at
Muzak's cost) all Earth Stations, Recorded Media, and other equipment provided
Licensee by Muzak; and
(e) Promptly pay all sums indisputably owing to Muzak.
11.2 Action Required of Muzak. Upon termination or expiration (without
------------------------
renewal of License rights) of this Agreement, Muzak shall promptly pay all sums
indisputably owing to Licensee. Muzak shall not provide or directly or
indirectly make available to any successor licensee in the Territory (including
any owned affiliates) any of Licensee's customer lists or customer contract
termination dates or terms; provided, however, that Muzak may transfer to such
successor licensee any contract rights purchased by Muzak from Licensee under
the terms of Exhibits E and G hereto.
44
<PAGE>
XII. TRANSFER OF BUSINESS OR CONTROL OF LICENSEE
-------------------------------------------
12.1 By Licensee and its Owners. Muzak has entered into this Agreement in
--------------------------
reliance on the business skills, financial capacity, and personal character of
Licensee and its owners. Accordingly, Licensee shall not permit the transfer of
any interest in or of Licensee that would have the effect, alone or together
with other previous, simultaneous, or proposed transfers, of directly or
indirectly transferring a controlling interest (whether in stock, partnership
interests or otherwise) in this Agreement, Licensee, or a major portion of the
assets used in the Business without the prior written consent of Muzak and
without otherwise complying with the requirements of this Article XII. Any such
purported assignment or transfer, by operation of law or otherwise, not having
the written consent of Muzak and not otherwise complying with the requirements
of this Article XII shall be null and void and shall constitute a material
breach of this Agreement.
12.2 Consent of Muzak. Muzak shall not unreasonably withhold its consent
----------------
to a transfer described in Section 12.1; provided, however, that Muzak may
require any or all of the following as conditions of its approval:
(a) All of Licensee's accrued monetary obligations to Muzak shall have
been satisfied (or otherwise provided for to
45
<PAGE>
Muzak's satisfaction, including without limitation the escrowing with counsel at
closing of the full amount of such obligations);
(b) The transferee and its owners shall enter into a written
assignment, in a form reasonably satisfactory to Muzak, assuming and agreeing to
discharge all of Licensee's obligations under this Agreement;
(c) The transferee shall demonstrate to Muzak's reasonable
satisfaction that (i) the transferee has the personal character and the
financial resources to conduct the Business, (ii) the transferee personally has
the general business experience to conduct the Business or will employ during
the term of this Agreement a general manager with such business experience to
conduct the Business, and (iii) the transferee is not in a position to use the
information obtained as a licensee of Muzak in a manner that will be harmful to
Muzak outside the Territory; and
(d) The transferee shall pay Muzak a transfer fee as follows:
(i) For any transfer to an existing licensee of Muzak (or any
entity owned or controlled by or having common ownership with an existing
licensee of Muzak), the sum of $1,000; or
46
<PAGE>
(ii) For any other transfer, (A) the sum of $2,500 for a Business
having Gross Billings (as defined herein) of $20,000 per month or less, and
(B) the sum of $5,000 for a Business having Gross Billings (as defined
herein) in excess of $20,000 per month.
In the event Muzak fails to respond to any request for approval of a
transfer to another MUZAK(R) licensee within 20 business days and to all others
within 30 business days of its receipt of a completed application for transfer,
then the request shall be deemed approved, subject only to Muzak's receipt of
notification of the transferee's assumption of Licensee's obligations, and of
the assignment to the transferee of Licensee's rights, under this Agreement.
12.3 Collateral. Muzak will not require approval of the assignment,
----------
transfer, pledge, or hypothecation of all or any part of the assets of the
Business, excluding this Agreement, and, if Licensee is a corporation, all or
any part of the stock of said corporation, to banks or other lending
institutions as collateral security for loans made directly to or for the
benefit of the Business. However, such approval will be required for any
proposed assignment of this Agreement.
12.4 Transfer to Family Member. An individual may transfer his or her
-------------------------
interest in Licensee or this Agreement to a member of
47
<PAGE>
his or her immediate family or to a corporation controlled by such individual,
provided that the requirements set forth in paragraphs (a), (b), and (c) of
Section 12.2 are met. No transfer fee shall be required for any such transfer.
12.5 By Muzak. Muzak shall have the right to transfer or assign all or
--------
any part of its rights or duties hereunder to any person or entity. Muzak shall
promptly notify Licensee of any such transfer.
XIII. PROPRIETARY MARKS
-----------------
13.1 Ownership. Muzak represents that it is the owner of all right,
---------
title, and interest in and to the Proprietary Marks. Muzak will take all steps,
including the taking of legal action, reasonably necessary to preserve and
protect the ownership and validity in and of the Proprietary Marks. Licensee
shall not directly or indirectly contest the validity or Muzak's ownership of
the Proprietary Marks. In the event that litigation involving the Proprietary
Marks is instituted or threatened against Licensee, Licensee shall promptly
notify Muzak and shall cooperate in the defense or settlement of such
litigation, which Muzak shall have the right to control at its expense.
Licensee expressly understands and acknowledges that Muzak is the owner of all
right, title, and interest in and to the Proprietary Marks and the goodwill
associated with and symbolized by them.
48
<PAGE>
Licensee's use of the Proprietary Marks pursuant to this Agreement does not give
Licensee any ownership interest or other interest in or to the Proprietary
Marks, except the license granted by this Agreement.
13.2 Infringement. Licensee shall promptly notify Muzak of any suspected
------------
infringement of the Proprietary Marks, and of any challenge to Muzak's ownership
of, or Licensee's right to use, the Proprietary Marks. Subject to Section 13.1,
Muzak shall have the sole right to decide whether an administrative or judicial
proceeding, or other action, should be undertaken in response to any such
suspected infringement or challenge, and, if any such proceeding or action is to
be undertaken, to initiate and control such proceeding or action at its expense.
In the event Muzak elects to undertake any such proceeding or action, Licensee
agrees to cooperate with Muzak in such effort. Licensee shall have no right to
institute any litigation against a third party relating to the Proprietary Marks
without Muzak's prior written consent.
13.3 Use. Licensee's right to use the Proprietary Marks is limited to
---
such uses as are authorized under this Agreement. Licensee shall not use the
Proprietary Marks as part of its corporate or other legal name. Licensee shall
comply with Muzak's instructions at Muzak's cost in filing and maintaining the
requisite trade name or fictitious name registrations, and
49
<PAGE>
shall execute any documents reasonably deemed necessary by Muzak or its counsel
to obtain protection for the Proprietary Marks or to maintain their continued
validity and enforceability. Unless otherwise authorized or required by Muzak,
Licensee shall use the Proprietary Marks without prefix or suffix and shall
comply with Muzak's instructions regarding the use of the federal registration
symbol and other trademark or service mark designations.
13.4 Substitution of Proprietary Marks. Muzak reserves the right to add
---------------------------------
Proprietary Marks and, except with respect to the MUZAK(R) trademark, to
substitute different Proprietary Marks, or discontinue the use of Proprietary
Marks, for use in identifying the Services if Muzak's currently owned
Proprietary Marks no longer can be used, or if Muzak determines that such
addition, substitution, or discontinuation will be beneficial to its business
and provides to Licensee at least six (6) months' prior notice of such addition,
substitution or discontinuation. All such additions, substitutions or
discontinuations will be reflected in an amendment of Exhibit C and shall not
affect the validity of this Agreement, which shall, in all respects, be deemed
modified to provide for such addition, substitution or discontinuation.
50
<PAGE>
XIV. MISCELLANEOUS
-------------
14.1 Representations of Licensee. Licensee represents and warrants to
---------------------------
Muzak that, on the date of this Agreement:
(a) If Licensee is a trust, corporation, or partnership, it is duly
organized, in good standing, and qualified to do business in all jurisdictions
included in the Territory; all controlling ownership interests in Licensee are
directly and indirectly held by those persons and entities listed on the
signature pages hereof, and no other persons or entities own any controlling
interests in Licensee; and it has all necessary power and authority to execute,
deliver, and perform this Agreement.
(b) There are no actions, suits, proceedings, or investigations in any
court or before any governmental agency or instrumentality which affect or are
reasonably likely to affect Licensee's ability to perform its obligations under
this Agreement.
14.2 Representations of Muzak. Muzak represents and warrants to Licensee
------------------------
that, on the date of this Agreement, it is duly organized and in good standing
as a limited partnership under the laws of the State of Delaware and has all
necessary power and authority to execute, deliver, and perform this Agreement.
51
<PAGE>
14.3 Independent Contractor. Muzak and Licensee are independent
----------------------
contractors vis-a-vis each other and neither party, nor their respective
employees and agents, are or are to be construed to be either legal or implied
agents, servants or employees of the other party or to have authority to act for
or on behalf of the other party. No acts taken or assistance given by one party
to the other pursuant to this Agreement will be construed to alter this
relationship. Without limiting the generality of the foregoing, but subject to
the terms of the Multi-Territory Accounts Program as described herein, Section
2.4 (including Exhibit E), the In-Store Advertising Agreement between Muzak and
Licensee, and any other written contract between Muzak and Licensee, nothing in
this Agreement shall authorize one party to make any contract, agreement,
warranty or representation on behalf of the other party or to incur any debt or
obligation in the other party's name, and the other party shall in no event
assume liability for, or be deemed liable hereunder as result of, any such
action. Without limiting the rights of a party to enforce its rights hereunder,
a party shall not be liable to a third party by reason of any action or omission
of the other party in the conduct of its business.
14.4 Release. Muzak and Licensee hereby release and forever discharge
-------
each other, and their respective predecessors, successors, representatives,
assigns, agents, owners, employees, officers, and directors ("Designees"), of
and from any claims,
52
<PAGE>
debts, liabilities, demands, obligations, costs, expenses, actions, and causes
of action of every nature, character, and description, vested or contingent,
which such releasing party now owns or holds, or has at any time heretofore
owned or held, or may at any time own or hold, against the other party or its
Designees, arising prior to and including the date of this Agreement and
relating to any prior franchise or license agreement; provided, however, that
this release shall not apply to any royalties or other monies owed, whether or
not previously reported as owing, from Licensee to Muzak; and further provided
that this release shall not apply to any claims, debts, liabilities, demands,
obligations, costs, expenses, actions and causes of action of every nature,
character and description, vested or contingent which are (i) at any time raised
or asserted by any party against the other party as a defense, counterclaim, or
crossclaim in any arbitration or litigation; (ii) of which the other party is
advised within 120 days of the date hereof; or (iii) the existence of which
could not now be reasonably known to a party and of which the other party is
advised within 120 days of the claiming party's knowledge thereof.
14.5 No Waiver. No failure of a party to exercise any right or power
---------
reserved to it in this Agreement or to insist upon compliance by the other party
with any obligation or condition in this Agreement, and no custom or practice of
the parties at variance with the terms hereof, shall constitute a waiver of such
53
<PAGE>
party's rights to demand exact compliance with any of the terms of this
Agreement. Waiver by a party of any particular default shall not affect or
impair such party's right with respect to any subsequent default of the same or
of a different nature, and, except as otherwise expressly provided herein, any
delay, forbearance, or omission of a party to exercise any power or right
arising hereunder shall not affect or impair such party's right thereafter to
exercise that or any other power or right.
14.6 Notices. Unless otherwise expressly provided herein, any and all
-------
notices required or permitted under this Agreement shall be in writing and shall
be personally delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, to the respective parties at the following
addresses unless and until a different address has been designated by written
notice to the other party:
Notices to Muzak: MUZAK
400 North 34th Street, Suite 200
Seattle, WA 98103
Attention: ___________________
Notices to Licensee: ______________________________
______________________________
______________________________
______________________________
Notice by certified or registered mail shall be deemed to have been given at the
date and time of receipt.
54
<PAGE>
14.7 Entire Agreement. This Agreement, the documents referred to herein,
----------------
and the exhibits and attachments hereto, constitute the entire, full, and
complete agreement between the parties concerning the subject matter hereof, and
supersede all prior agreements except those set forth in Exhibit H (the terms of
which shall remain in effect to the extent not expressly contradicted by the
terms hereof). Except for those amendments referred to in Sections 2.1, 2.2 and
13.4 and Exhibits E, F, and G, no amendment of this Agreement shall be binding
on either party unless mutually agreed to by the parties and executed by their
authorized officers or agents in writing.
14.8 Severability. Each portion, part, and term of this Agreement shall
------------
be considered severable, and if, for any reason, any portion, part, or term
herein is determined by a court or agency with valid jurisdiction to be contrary
to any existing or future law or regulation and invalid, it shall not impair the
operation of, or have any other effect upon, the other portions, parts, or terms
of this Agreement that remain otherwise intelligible.
14.9 Captions. All captions in this Agreement are for convenience only
--------
and do not in any way limit or amplify the provisions hereof.
55
<PAGE>
14.10 Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the parties hereto and, subject to Article XII, their
respective heirs, executors, representatives, successors, and assigns.
14.11 Counterparts. This Agreement may be executed in several
------------
counterparts, and all of such counterparts together shall constitute one
agreement binding on all parties thereto, notwithstanding that all parties are
not signatory to the original or same counterpart.
14.12 Attorney's Fees. If any action or proceeding is brought for the
---------------
enforcement of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in the action or proceeding, in addition to any other relief to which it or they
may be entitled.
14.13 Applicable Law. This Agreement shall be interpreted and construed
--------------
under the laws of the State of Colorado without reference to conflicts of law.
14.14 All Remedies. No right or remedy conferred upon or reserved to
------------
Muzak or Licensee by this Agreement is intended to be exclusive of any other
right or remedy herein or by law or equity provided, but each shall be
cumulative of every other right or
56
<PAGE>
remedy. Without limiting the generality of the foregoing, Licensee acknowledges
that its violation of the terms of Sections 4.3, 5.5, or 11.1 will result in
irreparable injury to Muzak for which no adequate remedy at law may be
available, and Licensee accordingly agrees that Muzak may seek to obtain the
issuance of an injunction prohibiting any conduct by Licensee in violation of
such terms.
14.15 Limitation. Licensee shall commence any action relating to Muzak's
----------
offer or sale of license rights hereunder to Licensee, or the execution of this
Agreement by Licensee, within one (1) year from the later of the date of
execution of this Agreement or the date Licensee reasonably should have
discovered the event or non-occurrence of the event first giving rise to the
action, and Licensee shall commence any other action arising hereunder within
two (2) years from the date Licensee reasonably should have discovered the event
or non-occurrence of the event first giving rise to such action. Licensee
agrees that any such claim not commenced within such time periods shall be
barred, it being understood that the assertion of any such claim as a defense,
counterclaim or cross-claim shall not be barred by this paragraph.
14.16 No Warranties. Muzak makes no warranties or guarantees upon which
-------------
Licensee may rely, and assumes no liability or obligation to Licensee, by
providing any waiver, approval,
57
<PAGE>
consent or suggestion to Licensee in connection with this Agreement, or by
reason of any neglect, delay, or denial of any request therefor.
14.17 No Implied Rights. Except as expressly provided to the contrary
-----------------
herein, nothing in this Agreement is intended, nor shall be deemed, to confer
upon any person or legal entity other than Licensee, Muzak, Muzak's officers,
partners, and employees, and such of Licensee's and Muzak's respective
successors and assigns as may be contemplated (and, as to Licensee, permitted)
by Article XII hereof, any rights or remedies under or by reason of this
Agreement.
14.18 Survival. All provisions of this Agreement that pertain to
--------
Licensee's rights and duties regarding Licensee's delivery of the Services to
certain Subscribers after the date of expiration or termination of this
Agreement shall survive such expiration or termination to the extent necessary
to give full effect to such rights and duties. All other covenants and
obligations of Muzak or Licensee that are to be performed or observed after the
expiration or termination of this Agreement, including, without limitation,
those set forth in Sections 5.5 and 14.3, Article XI, and Exhibits E and G,
shall also survive such expiration or termination.
58
<PAGE>
14.19 Conversion. Upon the expiration or earlier termination of this
----------
Agreement, in the event the addressability feature of Muzak's DBS facilities
permits Muzak to switch Licensee's music subscribers to another subscription
music supplier and Muzak has received written permission from such music
supplier and blanket indemnification from Licensee, then within a reasonable
time following Licensee's written direction to Muzak, Muzak shall perform one
such switch with respect to each such subscriber at the following cost to
Licensee: the greater of (i) Muzak's standard switching charge then in effect,
or (ii) Muzak's incremental out-of-pocket costs directly attributable to the
making of such switches.
14.20 Most Favorable Terms. In the event that after September 1, 1990
--------------------
Muzak grants for the first time (and not pursuant to or in renewal of any
agreement in existence at September 1, 1990) to any other U.S. licensee of Muzak
(i.e., a distributor of the Services in a territory within the United States)
financial or other material terms (other than temporary or transient adjustments
and accommodations) that are more favorable than the terms set forth herein,
Muzak must offer such more favorable terms to Licensee; provided, however, that
if, and to the extent, Muzak is required by the laws and regulations of the
State in which another licensee resides or operates its business to offer such
other licensee more favorable terms than those set forth herein, Muzak shall not
be required to offer such
59
<PAGE>
more favorable terms to Licensee but shall notify the then-president of the IPMA
of the imposition of such legal or regulatory requirement.
XV. ACKNOWLEDGEMENTS
----------------
15.1 Independent Investigations. Licensee acknowledges that it has
--------------------------
conducted an independent investigation of the business licensed hereunder, and
recognizes that the business venture contemplated by this Agreement involves
business risks and that its success will be largely dependent upon the ability
of Licensee as an independent person or entity. Muzak expressly disclaims the
making of, and Licensee acknowledges that it has not received, any warranty or
guarantee, express or implied, as to the potential volume, profits, or success
of the business venture contemplated by this Agreement.
15.2 Disclosure. Licensee acknowledges that it received a copy of this
----------
Agreement and all exhibits and attachments thereto, and agreements relating
thereto, at least five (5) business days prior to the date on which this
Agreement was executed. Licensee further acknowledges that it received the
disclosure documents required by the Trade Regulation Rule of the Federal Trade
Commission entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures" at
60
<PAGE>
least ten (10) business days prior to the date on which this Agreement was
executed.
15.3 Opportunity to Review. Licensee acknowledges that it has read and
---------------------
understands this Agreement and the exhibits and attachments hereto, and
agreements relating hereto, and that Muzak has accorded Licensee ample time and
opportunity to consult with advisors of Licensee's own choosing about the
potential benefits and risks of entering into this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
on the day and year first above written.
MUZAK LIMITED PARTNERSHIP,
a Delaware limited partnership
By: ______________________________
Title: ___________________________
Licensee:
__________________________________
By: ______________________________
Title: ___________________________
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<PAGE>
Each of the undersigned (i) owns, directly, indirectly, or beneficially, a
controlling interest in Licensee; (ii) has read this Agreement; and (iii) agrees
to be bound by those provisions of this Agreement that impose obligations on the
owners of controlling interests in Licensee.
_____________________________________
(Typed Name)
- -------------------------------------
Date: ______________________________
Address: ___________________________
___________________________
_____________________________________
(Typed Name)
- -------------------------------------
Date: ______________________________
Address: ___________________________
___________________________
_____________________________________
(Typed Name)
- -------------------------------------
Date: ______________________________
Address: ___________________________
___________________________
_____________________________________
(Typed Name)
- -------------------------------------
Date: ______________________________
Address: ___________________________
___________________________
<PAGE>
AMENDMENT TO THE
MUZAK(R) NATIONAL ACCOUNTS PROGRAM
This Amendment to the Muzak National Accounts Program ("Amendment") is made
and entered into as of this __ day of __________, 1996, by and between MUZAK
LIMITED PARTNERSHIP, a Delaware limited partnership ("Muzak") and
_____________________ ("Licensee"). The parties agree as follows:
1. Recitals. On __________________, the parties entered into a License
--------
Agreement (the "Agreement"), pursuant to which Muzak granted to Licensee an
exclusive license to engage in the business of providing subscription music
services ("Music Services") and adjunct services (collectively, the "Services")
in the Territory identified in the Agreement. Exhibit G to the Agreement
("Exhibit G") sets forth the terms of the Muzak National Accounts Program. The
parties desire to amend Exhibit G in the manner set forth herein in order to set
forth the terms and conditions on which the parties will provide Music Services
to National Account Subscribers with V-Sat systems ("V-Sat Subscribers"). The
capitalized term "National" is used herein in place of, but with the same
meaning as, the term "Multi-Territory" used in the Agreement. Other capitalized
terms used in this Amendment and not herein defined are used with the meanings
given such terms in the Agreement.
2. V-Sat Surcharge. The parties recognize that the provision of the
---------------
Music Services to V-Sat Subscribers will require Muzak to lease additional
satellite channels, and wish to provide for the sharing of the cost of such
additional satellite channels on the terms and conditions set forth herein.
(a) In addition to the fees to be paid by Licensee pursuant to the
Agreement, Licensee shall pay to Muzak each calendar month, in consideration of
Muzak's purchase of satellite space for the purpose of providing the Music
Services to V-Sat Subscribers approved as national accounts and for receipt of
V-Sat Service by the National Sales Committee (the "Committee") in accordance
with the National Accounts Program, a surcharge (the "V-Sat Surcharge") in the
amounts set forth below for category ___ for every two (2) satellite channels
leased by Muzak:
<TABLE>
<CAPTION>
Licensee Number of Businesses and/or Monthly Fee
Category Population Within Territory per 2 Channels
- -------- --------------------------- --------------
<S> <C> <C>
A 70,000 or more businesses $94
B 60,000 through 69,999 businesses 56
C 50,000 through 59,999 businesses 49
D 40,000 through 49,999 businesses 41
E 30,000 through 39,999 businesses 35
F 20,000 through 29,999 businesses 22
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C>
G 10,000 through 19,999 businesses 12
H 5,000 through 9,999 businesses 5
I 4,999 or fewer businesses or 2
population of 100,000 or less
</TABLE>
Muzak may recategorize Licensee for purposes of this paragraph (a) in accordance
with the terms of the Agreement. The V-Sat Surcharge supersedes amounts
currently paid by Licensee on a per-account basis for satellite channels leased
by Muzak to provide V-Sat service to existing customers.
(b) Licensee acknowledges that if additional V-Sat Subscriber
National Contracts are approved in accordance with the National Accounts Program
which require Muzak to lease additional satellite channels for delivery of Music
Services, such channels shall be leased by Muzak in increments of two, and an
additional V-Sat Surcharge in the amount set forth above shall be paid by
Licensee for every two additional channels leased. No V-Sat Subscriber National
Contracts will be approved by the Committee without first determining and
approving the satellite channel lease fees then applicable to such V-Sat
Subscriber National Contract.
(c) Licensee acknowledges that the V-Sat Surcharges set forth above
are based on a lease fee of $4,600 per month per two satellite channels. The V-
Sat Surcharges set forth above will be adjusted to reflect any different lease
fees charged to Muzak. The V-Sat Surcharges will at all times reflect a
straight pass-through of the lease fees paid by Muzak.
(d) Any adjustment in the V-Sat Surcharge(s) pursuant to paragraphs
(a), (b) or (c) above shall become effective for the calendar month immediately
following the month in which notice of such adjustment is given to Licensee.
(e) The V-Sat Surcharge(s) shall be payable by Licensee until the
earlier of the expiration or termination of the License Agreement or the
applicable satellite channel lease. The V-Sat Surcharge(s) shall be paid within
forty-five days after the date of Muzak's monthly billing to Licensee.
3. Effect on License Agreement. The parties understand and agree that
---------------------------
their execution of this Amendment does not (i) constitute a renewal or extension
of the Agreement or (ii) derogate from any right of Licensor or Licensee under
law with respect to the expiration, termination, or nonrenewal of the Agreement.
Except as specifically amended herein, the Agreement shall remain in full force
and effect and is hereby ratified and confirmed.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
MUZAK LIMITED PARTNERSHIP ____________________________
By:________________________ By:_________________________
Title: Title:
3
<PAGE>
EXHIBIT 10.18
<PAGE>
[LOGO OF MUZAK APPEARS HERE] MUSIC SERVICES AGREEMENT
12595 N.E. Marx Street . Portland, OR 97230
Phone (503) 259-7573 . Fax (503) 254-6304
Date of Agreement:______________________ Commencement Date:__________________
SUBSCRIBER NAME:________________________________________________________________
SUBSCRIBER ADDRESS ("Premises"): BILLING ADDRESS:
ADDRESS ADDRESS
- ---------------------------------------- ------------------------------------
CITY STATE ZIP CITY STATE ZIP
- ---------------------------------------- ------------------------------------
TELEPHONE ( ) TELEPHONE ( )
- ---------------------------------------- ------------------------------------
FACSIMILE ( ) FACSIMILE ( )
- ---------------------------------------- ------------------------------------
1. SERVICES
During the term of this Agreement, Muzak agrees to provide to the Subscriber, at
the Premises, the following music services program(s) (the "Program"):
________________________________________________________________________________
________________________________________________________________________________
2. EQUIPMENT
Muzak agrees to provide equipment at the Premises as follows:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
3. FEES
In consideration of the services and equipment to be provided as set forth
above, Subscriber shall pay Muzak as follows:
a. A receiving equipment installation charge of [_] $___ DBS [_] $___ SCA
b. A one-time equipment installation charge of $_________.
c. A recurring monthly service charge of $_________.
Fees payable in advance of each [_] month [_] quarter [_] half year
[_] year
d. A one-time opening tape library charge of $___ for ___ tapes (___ day
rotation plan)
e. A deposit of $_________.
Muzak shall be responsible for any copyright fees or royalties associated with
Muzak's provision of the music Program(s) to Subscriber except as provided on
the reverse side of this Agreement.
4. TERM
This Agreement shall remain in effect for an initial term of sixty months from
the Commencement Date and shall be automatically renewed for subsequent sixty
month terms unless terminated at the end of any term by either party by
providing written notice to the other party by certified mail at least ninety
days prior to the expiration of the initial or any subsequent term.
5. CONTINUATION OF AGREEMENT
The terms and conditions set forth on the reverse side are part of this
Agreement. This Agreement shall become binding on the parties hereto when
signed by Subscriber and accepted and approved by Muzak.
MUZAK LIMITED PARTNERSHIP: SUBSCRIBER:
_______________________________ ________________________________
Account Executive Signature Company Name
_______________________________ ________________________________
Print Name Authorized Signature
________________________________
Print Name
_______________________________ ________________________________
Manager's Signature Title
<PAGE>
6. USE OF PROGRAMS
Subscriber shall not transmit or permit the transmission of the Program by
others or amplify the Program so as to be audible outside the Premises.
Subscriber shall not dub, record, re-record, transcribe, or re-transcribe the
Programs in any manner or by any means or method. Subscriber understands that
recordings included in the Program may be copyrighted works. Subscriber shall
not use the Program (i) to displace a live orchestra, (ii) as an accompaniment
to dancing, skating, aerobics or other similar forms of physical activity or
entertainment or (iii) in those areas for which an admission fee is charged in
any premises. Subscriber shall not transmit the Program nor use the services
contained therein outside the Premises as designated in this Agreement.
7. PROVISION OF EQUIPMENT
Subscriber shall not, directly or indirectly, sell, mortgage, pledge, or
otherwise dispose of or encumber any Muzak owned equipment. Subscriber shall
adequately insure provided equipment against damage or loss and present evidence
of such insurance to Muzak upon request, and shall, upon expiration or earlier
termination of this Agreement, promptly return to Muzak all such equipment in
good condition (or pay the full replacement value thereof). Upon removal of the
equipment, Muzak shall not be required to repair, replace or otherwise re-
establish the Premises to their original condition.
8. MAINTENANCE AND CARE OF EQUIPMENT
Muzak shall maintain broadcast receiving equipment (receiver and antenna) for
the term of the Agreement. All other items of equipment that are provided to
Subscriber by Muzak (other than microphones) will be maintained by Muzak in good
operating condition for a period of one year from date of installation at no
additional charge to Subscriber. All maintenance shall be exclusively limited to
that resulting from ordinary and proper use of the equipment. Maintenance of
equipment not specifically required to be performed by Muzak shall be the
responsibility of Subscriber. Thereafter, or in the event of maintenance during
the first year that does not result from ordinary and proper use, Subscriber
shall pay Muzak's usual and customary repair charges. MUZAK'S OBLIGATIONS UNDER
THIS PARAGRAPH ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED RELATING
TO THE EQUIPMENT, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE. Except for Muzak's maintenance obligations as set
forth herein, Subscriber shall indemnify Muzak and hold it harmless from and
against any and all losses, claims, and expenses relating to the equipment
provided hereunder to Subscriber, including without limitation losses caused by
accident, fire, theft, or misuse of the equipment. Subscriber shall provide
adequate electrical outlets and power for the equipment.
9. PROVISION OF TAPES
In the event that the Program is provided by means of an on premises product
such as tapes, cassettes, or compact discs (referred to as "Tapes"), the Tapes
will be mailed or otherwise delivered to Subscriber and Muzak shall promptly
replace without charge any Tape that is defective when received. Subscriber
shall return all Tapes at the time and in the manner designated by Muzak and
shall pay Muzak the replacement value of each Tape that is not so returned or
that is returned in damaged condition. Subscriber shall not change or remove
any lettering, insignia, or other indicia on the Tapes. Under no circumstances
shall title to the Tapes pass to Subscriber, and Subscriber shall not, directly
or indirectly, sell, mortgage, pledge or otherwise dispose of or encumber the
Tapes.
10. OTHER CHARGES AND FEES
a. Subscriber shall pay Muzak the incremental cost of any increase in copyright
fees charged by ASCAP, BMI or other similar entities beyond what is charged
as of the date hereof, and any sales, use, excise, or other taxes or
governmental charges (except income taxes) arising under this Agreement.
b. Unless otherwise specified, all charges and fees due are payable in advance
of the billing term of this Agreement. Late payments of fees and charges due
hereunder are subject to late payment and interest charges not to exceed the
maximum rate permitted by law.
c. Muzak reserves the right to increase the monthly Program charge to
Subscriber, such increase not to exceed ten percent in a one-year period,
after providing written notice to Subscriber that an increase will become
effective with its next monthly invoice.
d. Subscriber shall pay a standard fee for each requested change in music
program.
e. Subscriber shall be responsible for obtaining all permits associated with the
provision of the Program to Subscriber, if such permits are necessary.
f. Subscriber shall pay all telephone line charges associated with the provision
of the Program to Subscriber, if such charges are necessary.
11. INTERRUPTION OF SERVICE
Muzak shall not be liable for any failure or interruption of service due to acts
of God, strikes, power failures, emergencies, mechanical failure, government
action, action or inaction by the Subscriber, its employees, agents, invitees or
other cause beyond Muzak's control. For any failure or interruption other than
those set forth above that is in excess of twenty-four (24) hours and that is
brought to Muzak's attention in writing within forty-eight (48) hours after the
commencement of such failure or termination, the time of interruption of service
beyond twenty-four (24) hours shall be credited on a prorata basis based on the
monthly fee to the next monthly bill of Subscriber. Said credit shall be the
sole and exclusive remedy of Subscriber with respect to any interruption or
failure of the Program. Muzak shall not be liable for any incidental or
consequential damages whatsoever.
12. SALE OR CHANGE OF SUBSCRIBER'S BUSINESS
Sale, transfer, closure or change in location of Subscriber's business by the
Subscriber herein designated shall not reduce, eliminate of otherwise affect its
obligation under this Agreement. This Agreement may not be assigned by
Subscriber without the prior written consent of Muzak. This Agreement is fully
assignable by Muzak.
13. REMEDIES UPON SUBSCRIBER DEFAULT
Default in payment or violation of any terms of this Agreement by Subscriber
shall cause the entire contract balance, including past due amounts, to become
immediately due and payable to Muzak as liquidated damages. In the event of
such default or violation, Muzak shall have the right without notice to enter
the Premises of Subscriber and remove the equipment and any Tapes and
discontinue the Program. If Muzak is required to bring legal action to enforce
the terms of this Agreement, all such legal fees and related costs incurred in
connection with Muzak shall be borne by the Subscriber.
14. GENERAL
This Agreement constitutes the sole and entire understanding between the parties
with respect to the subject matter hereof and supersedes all prior
conversations, representations, promises whether verbal or written. No
modification of this Agreement shall be valid unless made in writing and signed
by each party. The provisions of this Agreement are severable; if any clause or
provision shall be held invalid or unenforceable, in whole or in part, then such
invalidity shall attach only to such clause or provision, or part thereof, and
shall not affect any other clause or provision. Muzak shall have the right to
modify or terminate this Agreement in the event that any license agreement
applicable to Muzak's provision of the Program (including those with ASCAP or
BMI) is modified or terminated.
<PAGE>
Exhibit 10.19
<PAGE>
MUZAK(R) MULTI-TERRITORY ACCOUNT
SERVICE AGREEMENT [LOGO OF MUZAK APPEARS HERE]
This Agreement ("Agreement") is made as of the ____ day of ____________________,
199__ by and between MUZAK LIMITED PARTNERSHIP, acting as agent for the
Servicing Music Suppliers listed on Exhibit "A" hereto as now existing or as
subsequently amended ("Supplier") and _______________________________________
("Subscriber"). The parties agree as follows:
1. MUSIC SERVICES
Supplier provides MUZAK(R) subscription music programming (the "Music
Service") to commercial establishments. Subscriber owns, operates,
franchises or controls the commercial establishments listed in Exhibit
"B" ("Serviced Premises"). The parties agree that, subject to
paragraph 6 below, Supplier shall provide the Music Service to each of
the Serviced Premises, and, subject to pre-existing contracts for
subscription music services, to each other commercial establishment
owned, operated, franchised or controlled by Subscriber that receives
subscription music services. Subscriber acknowledges that the fees to
be paid to Supplier pursuant to this Agreement assume the provision of
the Music Service to all commercial establishments owned, operated,
franchised or controlled by Subscriber, subject to pre-existing
contracts for subscription music services. Music service description:
______________________________________________________________________
______________________________________________________________________
2. EQUIPMENT
For the consideration set forth in Section 3 below, Supplier shall
provide the following equipment to each Serviced Premises:
a. Purchased Equipment: ____________________________________________
______________________________________________________________________
______________________________________________________________________
b. Other Equipment: ________________________________________________
______________________________________________________________________
(Subscriber may obtain additional equipment from Supplier on terms to
be negotiated on a location-by-location basis. This Agreement shall
not affect the validity or enforceability of any pre-existing
agreement between a Servicing Music Supplier and Subscriber or a
Serviced Premises for the provision of equipment other than equipment
for the reception of the Music Service as identified in this paragraph
2, and any such pre-existing agreement shall remain in full force and
effect until its expiration or earlier termination in accordance with
its terms.)
3. FEES
In consideration of the services and equipment provided to Subscriber,
and in addition to the fees and charges referred to in Section 7
below, Subscriber shall pay the following fees and charges to Supplier
in the manner set forth herein:
a. One-time charges:
Purchased Equipment (as specified above).............. $________
Equipment Installation ............................... $________
b. Recurring (monthly) charges:
Music Service and Equipment........................... $________
c. Other: _______________________________________________ $________
4. TERM
This Agreement shall remain in effect for sixty (60) months from
_______________ and shall be automatically renewed for subsequent
sixty (60) month period(s) unless terminated by either party by
written notice delivered to the other party at least ninety (90) days
prior to the expiration of the initial term or the applicable renewal
term.
5. CONTINUATION OF AGREEMENT
THE TERMS AND CONDITIONS SET FORTH ON THE REVERSE SIDE ARE PART OF
THIS AGREEMENT.
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF the parties have entered into this Agreement as of the day
and year first above written.
Subscriber: Muzak Limited Partnership
____________________________________ As Agent for the Servicing Music Suppliers
By: ________________________________ By:__________________________________
Title: _____________________________ Title:_______________________________
Address: ___________________________
____________________________________
- --------------------------------------------------------------------------------
<PAGE>
6. INSTALLATION AND MAINTENANCE OF EQUIPMENT
Subscriber hereby grants to Supplier (subject to any necessary governmental
or third party approvals) the right to install all necessary equipment for
receiving the Music Service, including but not limited to an exterior
antenna or a satellite receiver "dish." Subscriber shall be solely
responsible for obtaining any governmental or third party approvals
required for the installation of such equipment, and, upon request, shall
provide Supplier with written evidence that required approvals have been
obtained. In the event that this Agreement requires a direct broadcast
satellite installation, Supplier nonetheless shall provide the Music
Service via sub-carrier authority or on-premise tape players, on such terms
as the parties shall then agree, in the event that any approvals required
for direct broadcast satellite delivery of the Music Service cannot be
obtained. Supplier-owned equipment provided to Subscriber hereunder shall
be maintained by Supplier at no additional cost to Subscriber; provided,
however, that such maintenance shall be limited to labor and repairs
required by ordinary and proper use of such equipment. Subscriber shall
provide Supplier with reasonable access to the Serviced Premises during
normal business hours for purposes of performing required maintenance.
Supplier shall retain ownership of all equipment provided hereunder that
has not been purchased by Subscriber, and Subscriber shall not transfer,
encumber or in any way alienate such equipment. Subscriber shall be
responsible for any loss or damage to the Supplier-owned equipment
(reasonable wear and tear excepted) while installed at a Serviced Premises.
If the Music Service is no longer provided to a Serviced Premises,
Subscriber shall provide Supplier with reasonable access to such premises
for purposes of removing any Supplier-owned equipment. Upon the removal of
any Supplier-owned equipment, Supplier shall not be required to repair,
replace or otherwise reestablish the premises to their original condition.
7. PAYMENT TO SUPPLIER
With respect to each Serviced Premises, Subscriber shall pay the fees
specified herein. One-time charges shall be due and payable on a "Net 10
Days" basis. Recurring charges shall be payable monthly in advance and
shall be due on the first day of the calendar month to which the charges
relate. Additionally, Subscriber shall pay to Supplier the incremental cost
of any increase in copyright fees charged by ASCAP, BMI or other similar
entities beyond what is charged as of the date hereof and any sales, use,
excise, or other taxes or governmental charges (except income taxes)
arising from this Agreement. Late payments shall be subject to an interest
charge at the maximum rate permitted by law. Annually during the term of
this Agreement Supplier may increase the recurring charges on 30 days'
prior written notice to Subscriber by a percentage increase equal to the
percentage increase in the Consumer Price Index, All Urban Consumers,
during the preceding year.
8. USE OF MUSIC SERVICE
Subscriber agrees that without the prior written consent of Supplier the
Music Service shall not be (i) performed in conjunction with commercial
announcements for which Subscriber or any other person receives
consideration of any kind or (ii) copied, recorded, dubbed or supplemented.
Subscriber further agrees that the Music Service shall not be amplified,
transmitted or retransmitted so as to be audible outside any Serviced
Premises.
9. FAILURE OR INTERRUPTION OF SERVICE
Supplier shall not be liable for any failure to perform its obligations
hereunder due to Acts of God, strikes, emergencies, mechanical failure,
regulatory or other governmental action, action or inaction by Subscriber,
its licensees, contractors, employees, agents or invitees, a breach of this
Agreement by Subscriber or any other cause beyond Supplier's control. For
any failure or interruption of the Music Service which is not excused under
the preceding sentence, which exceeds 24 consecutive hours in duration, and
of which Supplier receives written notice within 48 hours of such failure
or interruption, Supplier shall credit Subscriber's account with respect to
the affected Serviced Premises by an amount equal to one-thirtieth of the
recurring monthly charge for the Music Service for each 24-hour period
during which the failure or interruption continues. Said credit shall be
the sole and exclusive remedy of Subscriber with respect to any
interruption or failure of the Music Service. Supplier shall not be liable
for any incidental or consequential damages whatsoever.
10. ADDITIONS AND DELETIONS
In the event Subscriber wishes to add a Serviced Premises it shall give
Supplier 30 days' prior written notice of such addition. Within 10 days of
Supplier's receipt of such notice it shall advise Subscriber in writing if
it accepts the addition. If the addition is accepted Supplier shall
promptly install any equipment to be provided by Supplier and commence
providing the Music Service at the added premises. In the event Subscriber
wishes to delete a Serviced Premises, it shall give Supplier 30 days' prior
written notice of the deletion. Supplier shall promptly remove from the
deleted premises any Supplier-owned equipment. Subscriber's obligations
with respect to such deleted premises shall not cease unless Supplier is
then providing the Music Service to at least 95% of the Serviced Premises
shown in Exhibit B and (i) Subscriber has closed the deleted premises or
(ii) Subscriber has sold the deleted premises to an unrelated and
unaffiliated third party.
11. SERVICING MUSIC SUPPLIER
Subscriber acknowledges and agrees that all services to be provided by
Supplier hereunder shall be provided by the Servicing Music Supplier
identified in Exhibit "B" as being responsible for a particular Serviced
Premises. Subscriber further acknowledges that Supplier is entering into
and executing this Agreement on behalf of and as agent for each such
Servicing Music Supplier; that it is the express intent of both parties
hereto to establish privity of contract between Subscriber and each such
Servicing Music Supplier with respect to each Serviced Premises served by
each such Servicing Music Supplier and that the Xerographic copies of this
Agreement provided to each such Servicing Music Supplier for each such
Serviced Premises shall be deemed for all purposes a counterpart original
of this Agreement.
12. APPLICABLE LAW
In the event of a dispute affecting Serviced Premises located in one state
this Agreement shall be governed by and in accordance with the laws of that
state applicable to contracts made and to be performed wholly within such
state and venue shall rest with the court of general jurisdiction located
in the county where the subject Servicing Music Supplier maintains its
principal place of business. In the event of a dispute affecting Serviced
Premises located in more than one state this Agreement shall be governed by
and in accordance with the laws of the state where the Supplier which has
executed this Agreement as agent for the Servicing Music Suppliers
maintains its principal place of business, applicable to contracts made and
to be performed wholly within such state and venue shall rest with the
court of general jurisdiction located in the county where said Supplier
maintains such principal place of business. If any provision of this
Agreement is deemed unenforceable (in whole or in part) by a Court of
competent jurisdiction the parties agree that such Court shall amend or
delete such provision so as to effectuate the intent of such provision and
of this Agreement to the maximum extent that is enforceable.
13. SUCCESSORS AND ASSIGNS
This Agreement is fully assignable by Supplier but may not be assigned by
Subscriber without the prior written consent of Supplier, which consent
shall not be unreasonably withheld.
14. DEFAULT AND REMEDIES
Default in payment or violation of any material term of this Agreement by
Subscriber shall cause, at Supplier's option, the entire contract balance
to become immediately due and payable as liquidated damages and Supplier
shall have the right to enter any Serviced Premises, discontinue service,
and remove the Supplier-owned equipment. Subscriber shall reimburse
Supplier for all costs and expenses, including reasonable attorneys' fees
and costs, incurred in connection with Supplier's exercise of its rights
under this Agreement.
15. PREEXISTING CONTRACT
In the event a Servicing Music Supplier has a pre-existing contract for a
Serviced Premises, then at the option of such Servicing Music Supplier such
contract shall remain in full force and effect until it expires (without
giving effect to any automatic renewal clause), but upon such expiration
this Agreement shall immediately take effect.
16. NOTICES
All notices required to be sent by either party shall be in writing and
shall be sent certified mail postage prepaid to the respective addresses
set forth below their signatures on the reverse side.
17. WHOLE AGREEMENT
This Agreement constitutes the entire Agreement between the parties with
respect to the subject matter hereof and supercedes all prior agreements,
conversations, representations, promises of warranties (express or implied)
whether verbal or written. Except for a modification of the list of
Servicing Music Suppliers in Exhibits A and B hereto, which may be made by
Supplier, no modification of this Agreement shall be valid unless made in
writing and signed by both parties.
<PAGE>
Exhibit 10.20
<PAGE>
MUZAK(R) ADJUNCT SERVICES
SUBSCRIBER AGREEMENT [LOGO OF MUZAK APPEARS HERE]
1. This Adjunct Services Subscriber Agreement ("Agreement") is made this _____
day of __________, 19_____ between MUZAK LIMITED PARTNERSHIP, acting as
agent for the Servicing Muzak Affiliates listed in Exhibit A and Exhibit B
hereto as now existing or subsequently amended by MUZAK, and for itself
(specifically with respect to paragraphs 7, 8, 10, 11 and 12)
(collectively, "MUZAK") and ______________________________ (the
"Subscriber").
2. This Agreement shall remain in effect for a term of _____ months from
____________________, 19_____, and shall be automatically renewed for
subsequent _____-month terms unless terminated at the end of any term by
either party by written notice given to the other party at least ninety
(90) days prior to the end of such term. This Agreement shall become
binding when signed by Subscriber and accepted and approved by MUZAK.
Subject to the terms and conditions of this Agreement, MUZAK shall provide
to the Subscriber at the commercial locations ("Premises") set forth in
Exhibit B, one or more of the following services (the "Services") as
indicated below:
- --------------------------------------------------------------------------------
3. [_] ADPARTING/sm/ SERVICES are delivered by Direct Broadcast Satellite
(DBS) to a MUZAK-supplied DBS Audio Receiver. (5 Spot Minimum)
A. Number of Premises:__________.
B. Number of spots per scheduled hour:__________.
C. Message length: [_] 20 seconds; [_] 30 seconds.
D. Price per Premises per month: $__________.
E. If AdParting/sm/ Services are to be provided for less than term
described above, specify months of provision:
______________________________________________________________________
F. Describe special needs relating to advertising (e.g.,
scheduling):
______________________________________________________________________
______________________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. [_] BROADCAST DATA SERVICES are delivered by DBS to a MUZAK-supplied DBS
Audio Receiver equipped to receive MUZAK Data Services. Charges for
Broadcast Data Services are composed of a monthly charge per Premises
based on data transmissions totaling up to 500 kilobytes (for all
Premises) from the originating location, plus a per-message charge for
additional kilobytes of transmission.
A. Number of Premises:__________.
B. Basic Monthly Data Charge per Premises: $__________.
C. Per-message charge for additional kilobytes of transmission:
$__________.
D. Describe special needs and/or related charges for Broadcast Data
Services:_____________________
______________________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. [_] BROADCAST VIDEO SERVICES are delivered by DBS to a MUZAK-supplied
Video Receiver providing access to one-way video reception in
conjunction with a MUZAK-supplied DBS Antenna and Audio Receiver.
A. Basic Monthly Charge for Basic Broadcast Video Service as
described above is $__________ per Premises.
NOTE: Monthly charge does not include costs for transponder time,
which will be charged separately to Subscriber on a per-use basis.
Subscriber assumes the responsibility and cost of video production.
B. Describe special needs and/or related charges for transmission
and transponder services:______________________
______________________________________________________________________
- --------------------------------------------------------------------------------
6. Monthly charges indicated herein are billed monthly in advance and commence
on completion of installation of appropriate reception equipment as
designated above. Subscriber agrees to pay all charges for the Services as
indicated herein.
THE TERMS AND CONDITIONS SET FORTH ON THE REVERSE SIDE ARE PART OF THIS
AGREEMENT.
Subscriber:________________________ MUZAK LIMITED PARTNERSHIP
___________________________________
(Print Name of Business Entity) By:________________________________
By:________________________________ Title:_____________________________
Title:_____________________________
Address:___________________________ 400 North 34th Street, Suite 200
___________________________________ Seattle, WA 98103
INITIATING MUZAK AFFILIATE:
___________________________________
(Print Name of Business Entity)
By:________________________________
Title:_____________________________
Address:___________________________
___________________________________
<PAGE>
7. SUBSCRIBER MATERIALS. Subscriber shall provide to MUZAK at Subscriber's
sole expense and at such times and places and in such forms as are
reasonably requested by MUZAK, those data, video, advertising, and other
materials (if any) which are to be incorporated in the Services prior to
transmission to the Premises. Such materials are hereinafter collectively
referred to as the "Subscriber Materials." Subscriber shall be solely
responsible for the content of all Subscriber Materials, but MUZAK reserves
the right to refuse to transmit any Subscriber Materials the content,
transmission or broadcast of which it believes could infringe upon the
rights of others or otherwise be unlawful or the form of which does not
comply with MUZAK's requests as provided above. Subscriber shall comply
with all applicable governmental laws, rules and regulations pertaining to
the Subscriber Materials and their use in the Services. Subscriber shall
indemnify and hold harmless MUZAK and its officers, agents, partners, and
employees from and against any and all claims, liabilities, losses,
damages, costs and expenses (including reasonable attorney's fees),
including without limitation claims for infringement of proprietary rights,
misrepresentation, and defamation, arising out of or attributable in whole
or in part to the Subscriber Materials. This indemnity shall survive the
expiration or earlier termination of this Agreement.
8. EQUIPMENT
a. With respect to any items of equipment that are provided hereunder to
Subscriber by MUZAK including but not limited to Earth Stations, MUZAK
shall maintain such items in good operating condition; provided, however,
that such maintenance shall be exclusively limited to that resulting from
ordinary and proper use of the equipment. All other maintenance, repair
and replacement of such equipment shall be paid by Subscriber in accordance
with MUZAK's customary charges therefor. MUZAK'S OBLIGATIONS UNDER THIS
PARAGRAPH ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED,
RELATING TO THE EQUIPMENT, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE. Except for MUZAK's maintenance
obligations resulting from ordinary and proper use of the equipment as set
forth above, Subscriber shall indemnify MUZAK and hold it harmless from and
against any and all losses, claims, and expenses relating to the equipment
provided hereunder to Subscriber, including without limitation losses
caused by accident, fire, theft, or misuse of the equipment. Subscriber
shall provide electrical outlets and power as needed for the equipment.
b. Subscriber shall not, directly or indirectly, sell, mortgage, pledge,
or otherwise dispose of or encumber any MUZAK-owned equipment provided to
Subscriber, nor shall it change the location of, tamper with, or alter in
any manner such equipment. Subscriber shall execute such further documents
as are necessary or desirable to protect MUZAK's interests in such
equipment, shall adequately insure such equipment against damage or loss
and present evidence of such insurance to MUZAK upon request, and shall,
upon the expiration or earlier termination of this Agreement, promptly
return to MUZAK all of such equipment in good condition (or pay the full
replacement value thereof).
9. ADDITIONAL CHARGES
a. In addition to the fees specified on the reverse side of this
Agreement, Subscriber shall pay to MUZAK any sales, use, excise, or other
taxes or governmental charges (except income taxes) arising under this
Agreement. Subscriber shall also pay to MUZAK any incremental increases in
ASCAP, BMI or other licensing fees resulting from the services supplied
under this Agreement.
b. Late payments of fees and charges due hereunder are subject to late-
payment and interest charges not to exceed the maximum rate permitted by
law.
c. MUZAK may increase any or all of the charges stated on the reverse
side of this Agreement on an annual basis by providing at least 15 days'
prior written notice to Subscriber; provided, however, that any such
increase may not exceed 10% of the then existing charge without the
approval of Subscriber. Should any such increase exceed 10% and not be
approved by Subscriber, MUZAK may elect to terminate this Agreement. Such
termination shall not release Subscriber from any obligations which accrued
prior to the time of such termination. Such termination shall not affect
any other agreement Subscriber may have with MUZAK.
10. ASSIGNMENT. Subscriber shall not assign its rights or delegate its duties
under this Agreement without the prior written consent of MUZAK which
consent shall not be unreasonably withheld. Any assignment of this
Agreement by Subscriber without MUZAK's written consent shall be void and
shall at MUZAK's option constitute a breach hereof by Subscriber. In the
event Subscriber ceases to do business at any Premises, Subscriber shall
return to MUZAK in the manner designated by MUZAK all MUZAK-owned equipment
installed at such Premises; such cessation shall not, however, reduce
Subscriber's payment obligations hereunder unless MUZAK otherwise agrees in
writing. This Agreement shall be fully assignable by MUZAK. Subject to
the foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors, representatives,
and assigns.
11. LIMITATION OF LIABILITY. In the event MUZAK fails to provide one or more
of the Services to any Premises for a period of twenty-four consecutive
hours, and Subscriber provides MUZAK with written notice thereof within 48
hours after such failure, the following shall occur. Subscriber's account
shall be credited with an amount equal to one-thirtieth of the recurring
monthly charge for the affected Service for each such 24 hour reported
period. Notwithstanding the foregoing, in no event shall MUZAK be
responsible or liable (and no credit shall be given) for any failure of
MUZAK to perform its obligations hereunder due to Acts of God, strikes,
emergencies, mechanical failures, regulatory or other governmental action,
or inaction of Subscriber, its employees, agents, or invitees, a breach of
this Agreement by Subscriber, or any other cause beyond MUZAK's reasonable
control. In no event shall MUZAK be liable for incidental, consequential or
special damages arising out of or relating to this Agreement. Without
limiting the foregoing, under no circumstances will MUZAK be responsible
for the reception of the services by the Subscriber at any Premises or for
the accuracy or completeness of the information or other material included
in the Services.
12. TERMINATION BY MUZAK. If Subscriber fails to perform any of its
obligations hereunder and does not cure such failure within thirty days
after written notice thereof from MUZAK, or if Subscriber becomes insolvent
or bankrupt, MUZAK, in addition to all other rights it may have under law
or this Agreement, shall have the rights (i) to declare all amounts to be
paid by Subscriber during the remaining term hereof immediately due and
payable, (ii) to cease providing the Services to Subscriber, and (iii)
immediately to enter the Premises and take possession of all MUZAK-owned
equipment without liability to Subscriber therefore and without relieving
Subscriber of its obligations under this Agreement. Subscriber shall
reimburse MUZAK for all costs and expenses, including reasonable attorneys'
fees and court costs, incurred in connection with MUZAK's exercise of its
rights under this Agreement. Muzak shall have the right to terminate this
agreement in the event that there is only one Servicing Muzak Affiliate
providing services to Subscriber hereunder and the Muzak(R) license rights
of such servicing Muzak Affiliate have expired or terminated without
renewal.
13. SERVICING MUZAK AFFILIATES. Subscriber acknowledges and agrees that all
services to be provided by MUZAK hereunder shall be provided by the
Servicing Muzak Affiliate identified in Exhibit A as being responsible for
a particular Premises. Subscriber further acknowledges that MUZAK is
entering into and executing this Agreement on behalf of and as agent for
each such Servicing Muzak Affiliate with respect to each Premises served by
each such Servicing Muzak Affiliate and that the Xerographic copies of this
Agreement provided to each such Servicing Muzak Affiliate for each such
Premises shall be deemed for all purposes a counterpart original of this
Agreement.
14. APPLICABLE LAW. In the event of a dispute affecting Premises located in
one State, this Agreement shall be governed by and in accordance with the
laws of that State applicable to contracts made and to be performed wholly
within such State and venue shall rest with the court of general
jurisdiction located in the county where the subject servicing Muzak
Affiliate maintains its principal place of business. In the event of a
dispute affecting Premises located in more than one State, this Agreement
shall be governed by and in accordance with the laws of the State of
Washington applicable to contracts made and to be performed wholly within
such State, and Subscriber consents to the personal jurisdiction of the
State and federal courts of the State of Washington for purposes of
litigation affecting this Agreement. If any provision of this Agreement is
deemed unenforceable in whole or in part by a Court of competent
jurisdiction, the parties agree that such Court shall amend or alter such
provision so as to effectuate the intent of such provision and of this
Agreement to the maximum extent that is enforceable.
15. MISCELLANEOUS
a. This Agreement constitutes the entire understanding of the parties with
respect to the subject matter hereof and supersedes all prior
conversations, representations, promises, and warranties, whether verbal or
written, with respect to such subject matter. No modification of this
Agreement shall be valid unless made in writing and signed by each party;
provided, however, that MUZAK shall have the right to modify or terminate
this Agreement to the extent necessitated by a modification or termination
of any license or lease agreement applicable to its provision of the
Services.
b. The waiver of a breach of any provision of this Agreement shall not be
constituted as a waiver of any subsequent breach of the same or of a
different provision of this Agreement.
c. Each party represents and warrants that it has the power and authority
to enter into this Agreement and discharge its obligations hereunder, and
each person executing this Agreement on behalf of a party represents and
warrants that he or she has the power and authority to sign this Agreement
on behalf of such party.
d. All notices required under this Agreement shall be in writing and
personally delivered or sent, postage prepaid, by certified or registered
mail, return receipt requested to the parties at their addresses set forth
on the reverse side (or such other address as is hereafter, provided by a
party to the other party).
<PAGE>
Exhibit 10.21
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been separately
filed with the Commission.
TRANSPONDER LEASE AGREEMENT
---------------------------
THIS AGREEMENT, made and entered into this 9th day of December, 1993, by
and between Microspace Communications Corporation, a North Carolina corporation
("Microspace"), and Muzak Limited Partnership, a limited partnership with
principal offices in Seattle, Washington ("Customer").
WITNESSETH:
WHEREAS, Microspace and Customer entered into an agreement on May 6, 1988
for leased transponder capacity on Ku-2, a Ku-band domestic communications
satellite system operated by GE Americom Communications, Inc; and
WHEREAS, Microspace and Customer entered into an agreement on November 19,
1991 for leased transponder capacity on SBS-6/Galaxy IV/Ground Spare Ku-band
domestic communications satellites operated or to be operated by Hughes
Communications Galaxy, Inc; and
WHEREAS, it is the intention of Microspace and Customer that all of
Customer's Service shall be provided on Galaxy IV no later than February 1,
1996; and
WHEREAS, Microspace has leased transponder capacity on the Galaxy IV Ku-
band domestic communications satellite operated or to be operated by Hughes
Communications Galaxy Inc. (Hughes); and
WHEREAS, Customer desires to use part of the transponder capacity leased by
Microspace for the purpose of subcarrier transmission; and
WHEREAS, Microspace desires to provide such capacity to Customer pursuant
to the terms and conditions hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein made, the Parties, intending to be legally bound, hereby
mutually agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
meanings:
1.01 "Agreement" means this Agreement;
1.02 "The Satellite" means the domestic communications satellite designed
to operate in the Ku-band, positioned at the 99 degrees W.L. orbital position
and labeled by Hughes as Galaxy IV;
<PAGE>
2
1.03 "Satellite Commencement Date" shall mean the date, if any, on which
transponder service at the 99 degrees W.L. orbital location has commenced or
commences on the Galaxy IV satellite as determined by Hughes.
1.04 "Service" means the Transponder capacity leased by Customer from
Microspace;
1.05 "Microspace's Transponder" means that portion of a transponder or
transponders on The Satellite leased from Hughes by Microspace;
1.06 "Parties" means the signatories to this Agreement and a "Party" means
one of such signatories;
1.07 "Transponder" or "Transponders" means Microspace's Transponder;
1.08 "Transponder Failure" means with respect to Microspace's Transponder,
any of the following events:
(a) Twenty (20) or more "outage units" shall occur within any thirty
(30) consecutive days (an outage unit being an interruption of Microspace's
Transponder such that a credit allowance is due under Article V of this
Agreement); or
(b) Microspace's Transponder shall fail to meet Transponder
Performance Specifications for twelve (12) consecutive days.
1.09 "Transponder Performance Specifications" means those specifications
for the design and performance of the The Satellite Transponders contained in
Exhibit A and Exhibit B;
1.10 "Transponder Spares" means certain redundant transponder equipment
units which are designed as substitutes for equipment component units, the
failure of which could cause a transponder to fail to meet the Transponder
Performance Specifications.
1.11 "Interruption of Service" shall mean any time the Transponder used by
Customer fails to meet any of the Transponder Performance Specifications.
1.12 "Customer's Signal" means the complete intelligence to be transmitted
to Microspace's Transponder on behalf of Customer pursuant to this Agreement.
<PAGE>
3
ARTICLE II
SERVICE
-------
2.01 Transponder Service. Microspace shall provide transponder service to
-------------------
Customer as follows:
(a) Service Under Pre-Existing Agreements.
-------------------------------------
(i) Ku-2 Service; Termination of Ku-2 Lease Agreement.
-------------------------------------------------
Microspace shall continue to provide full-time (i.e., 24 hours per day, 7 days
per week) Service (as defined in the Transponder Lease Agreement between
Microspace and Customer dated May 6, 1988 as amended by Addendum to Transponder
Lease Agreement dated January 3, 1989, Amendment to Transponder Lease Agreement
dated January 4, 1989, and Second Addendum to Transponder Lease Agreement dated
January 23, 1991) (the "Ku-2 Lease Agreement") through January 31, 1996, at
which time the Ku-2 Lease Agreement shall be deemed to be terminated.
(ii) SBS-6/Galaxy IV/Ground Spare Service; Termination of SBS-
--------------------------------------------------------
6/Galaxy IV/Ground Spare Lease Agreement. Microspace shall continue to provide
- ----------------------------------------
full-time (i.e., 24 hours per day, 7 days per week) Service (as defined in the
Transponder Lease Agreement between Microspace and Customer dated November 19,
1991 (the "SBS-6/Galaxy IV/Ground Spare Lease Agreement") through March 31,
1994, at which time the SBS-6/Galaxy IV/Ground spare Lease Agreement shall be
deemed to be terminated.
(b) Galaxy IV Service. In addition to providing the service
-----------------
described in Subsection 2.01 (a) above, Microspace shall provide full-time
(i.e., 24 hours per day, 7 days per week) Service (as defined in Exhibit B to
this Agreement, commencing on February 1, 1994.
2.02 Orbital Location. Customer's Service shall be provided from 99
----------------
degress W. L. Orbital location.
2.03 Uplink Facilities. Microspace shall provide, within thirty (30) days
-----------------
after execution of this Agreement, transmitting equipment and related facilities
(hereinafter "Uplink Facilities") sufficient to transmit Customer's Signals from
the ground to Microspace's Transponder, subject to the following conditions:
(a) The Uplink Facilities shall be located in or near Raleigh, North
Carolina.
(b) Microspace will provide, operate and maintain transmitting
equipment which will be capable of sending Customer's
<PAGE>
4
Signal to Mircospace's Trasponder if Customer's Signal is configured so that it
is technically compatible with the transmitting equipment provided by
Microspace.
(c) Microspace will operate the Uplink Facilities in a reasonable
manner consistent with the type of equipment located thereon. Unless Microspace
commits an intentional breach, it will not be liable for consequential damages
for breach of this provision. As used herein, "consequential damages" includes
revenues lost to Customer as a result of the inability of Customer to transmit
Customer's Signal but does not mean the costs incurred by Customer in replacing
damaged property or in securing replacement facilities or replacement
transponder capacity.
(d) Customer will adhere to all reasonable rules and regulations
established by Microspace for the Uplink Facilities, including, but not limited
to, access by third persons.
(e) The Uplink Facilities provided by Microspace shall include
facilities to allow for the downlink of Customer's Signal from other satellites,
including those operating in C-band, for re-transmission to Microspace's
Transponder.
(f) Microspace will provide Customer space within a building at the
Uplink Facilities sufficient to accommodate standard wegener or equivalent
modulation equipment required for transmission of Customer's channels as defined
in the Exhibits of this Agreement. Customer will pay no rent for said space.
Additional rack space will be leased to Customer, if requested, at rates to be
agreed upon, subject to space available.
(i) All taxes or assessments which are incurred as the result
of the installation and operation of Customer's equipment will be paid by
Customer in a timely manner.
(ii) Microspace will provide electric power and temporary
emergency backup electrical power for the operation of Customer's equipment
without charge. Microspace will use all reasonable efforts to maintain a
suitable environment within the building to support the operation of standard
electrical devices typically installed in Uplink Facilities.
(iii) Microspace will not be responsible for damage to or
destruction of Customer's equipment located at the Uplink facilities unless the
damage or destruction is caused by Microspace's gross negligence or willful
misconduct.
<PAGE>
5
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
ARTICLE III
COMMENCEMENT OF SERVICE TERM
----------------------------
3.01 Term. This Transponder Lease Agreement, including Transponder
----
Service as defined in Section 2.01, shall begin December 9, 1993 and end on
---------------------
the "Expiration Date," meaning the earliest to occur of:
(a) The date that Hughes determines that Galaxy IV should be taken
out of service because there is insufficient fuel for continued operations;
(b) The termination or cancellation of this Agreement as provided in
Article X of this Agreement.
ARTICLE IV
MONTHLY CHARGE AND METHOD OF PAYMENT
------------------------------------
4.01 Monthly Charge. Customer shall pay to Microspace monthly, in
--------------
advance, the following amounts for Service during the following periods:
(a) Existing Ku-2 Service. For the period February 1, 1994 through
---------------------
January 31, 1996, Customer shall pay to Microspace monthly, in advance, the
amount as outlined in Article IV, Section 4.01 of the existing Ku-2 agreement
dated May 6, 1988 and amended by the addendum dated January 3, 1989, and the
second amendment dated January 23, 1991; and
(b) Existing SBS-6/Galaxy IV/Ground Spare Service. For the period
---------------------------------------------
February 1, 1994 through January 31, 1996, Customer shall pay to Microspace
monthly, in advance, the amount as outlined in Article IV, Section 4.01 of the
existing SBS-6/Galaxy IV/Ground Spare agreement dated November 1991; and
(c) Galaxy IV Service. Beginning February 1, 1996, Customer shall
-----------------
begin paying to Microspace, monthly, in advance, the amount of [**] through the
end of the term of this Agreement.
These charges constitute all charges for Service to be provided by
Microspace to Muzak during such periods under the Existing Ku-2 Agreement,
Existing SBS-6/Galaxy IV/Ground Spare Agreement and this Agreement, and in lieu
of all charges that would otherwise be payable under the Existing Ku-2 and SBS-
6/Galaxy IV/Ground Spare Agreements.
<PAGE>
6
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
Customer warrants that it will, as necessary, repoint and/or retrofit its
existing earth stations at its sole expense to operate to the specifications
contained in Exhibit B of this Agreement. In consideration of this expense,
Microspace shall provide a Ku-2 and Galaxy IV simulcast at no additional charge
to Customer for the period [February 1, 1994 through January 31, 1996].
If the term should not commence on the first day of a month or end on the
last day of a month, the monthly charge for the fractional part of the month
shall be calculated at a daily rate of one-thirtieth of the monthly charge
specified in Paragraph 4.01. All payments shall be made to Microspace at its
address as designated in Section 13.08 and shall be deemed to be made upon
receipt thereof by Microspace. Microspace will assess a late payment charge of
one and one-half percent (1.5%) compounded monthly on payments received after
the due date.
4.02 [**]
ARTICLE V
INTERRUPTION OF TRANSMISSION OVER TRANSPONDER
---------------------------------------------
5.01 Outage Allowance. If applicable, Microspace shall grant Customer an
----------------
Outage Allowance, as follows:
If a "Creditable Interruption of Service" (as defined below) occurs, then
for each full hour (i.e., 60 minutes) of such Creditable Interruption of Service
Microspace shall grant Customer a pro rata Outage Allowance, as defined below.
The Outage Allowance shall be based upon the monthly charge for Customer's
Service and the length of the Creditable Interruption of Service, calculated
pursuant to the equation below. Creditable interruptions shall be acknowledged
by Microspace through the issuance of credit memoranda. Such memoranda shall be
issued within fifteen (15) days of the close of each calendar month and shall
reflect all credit allowances accumulated by Customer during such month.
Customer may deduct from its next monthly payment the amount specified in the
credit memorandum received in the preceding month. As used herein, "Creditable
interruption of Service" shall mean the aggregate period (in hours) -- only
where such aggregation
<PAGE>
7
exceeds a total of (whether or not consecutive) twelve (12) hours during any
consecutive thirty (30) day period -- during which an Interruption of Service
occurs. For purposes of this Agreement, Creditable Interruption of Service shall
include such initial twelve (12) hour period and shall be measured from the time
Microspace receives notice from Customer of the Interruption of Service until
the time the Transponder has been restored to operation, but shall not begin in
any event until Customer ceases to use the Service.
Outage Allowance = Interruption of Service (in hours) X Monthly Lease Payment
----------------------------------------------------------
720 hours/month
In no case shall an Outage Allowance be made for any Interruption of
Service related to: (i) any failure on the part of Customer to perform its
transmission or other material or operational obligations pursuant to this
Agreement, (ii) failure of facilities provided by Customer, (iii) reasonable
periodic maintenance by Hughes, (iv) interference from third party transmissions
or usage, (v) cooperative testing between Customer and Microspace, except where
trouble or fault is found in the Transponder.
5.02 Resolution of Credit Disputes. In the event that Microspace and
-----------------------------
Customer cannot agree on the amount of credit due Customer following an
interruption, Customer may withhold payment of the disputed amount until
Microspace and Customer resolve the dispute; provided, however, that should a
credit dispute or disputes arise totalling two months service fees or more in
the aggregate, Microspace or Customer may cancel this Agreement on thirty (30)
days written notice and pursue all legal remedies available to resolve the
dispute, including claims of breach for wrongful termination.
ARTICLE VI
TRANSPONDER PROTECTION
----------------------
6.01 Restoration of Service. If Microspace's Transponder suffers a
----------------------
Transponder Failure, Customer will remain bound by this Agreement if
Microspace's Transponder is restored within 240 hours using a Transponder Spare
or unused transponder per the underlying lease agreement between Microspace and
Hughes as excerpted below:
"B. Provision of Continuing Service. In the event of a
-------------------------------
Transponder Capacity Failure, Hughes shall provide Customer's
Transponder Capacity using a spare component(s) of a Transponder on
the Leased Satellite (including a spare traveling wave tube(s)), if
available, or if such spare component(s) is unavailable, then by using
an alternate Transponder(s) on the Leased Satellite, if available. The
availability of such spare components(s) or alternate Transponder(s)
on the Leased Satellite, on a permanent or temporary basis, shall be
determined by Hughes in its sole discretion. The foregoing
notwithstanding, Customer's sole remedies for any preemption or
interruption of Use under this Article III, shall be the recovery of
an Outage Allowance pursuant to Article V, if applicable, or the
termination of this Agreement pursuant to Article VIII."
<PAGE>
8
If it is not so restored, Customer may terminate this Agreement immediately
and without any notice to Microspace. In the event that Satellite is
prematurely removed from service by Hughes and if Microspace has, pursuant to
the Hughes lease, preferential rights to replacement transponder capacity on a
successor satellite, Customer shall have the corresponding right to sublease
transponder service from Microspace on such successor satellite."
ARTICLE VII
TRACKING, TELEMETRY AND CONTROL
-------------------------------
7.01 Throughout the term of this Agreement, Hughes shall be responsible
for all the functions of Tracking, Telemetry and Control ("TT&C") including,
without limitation, stationkeeping, attitude control, and other satellite
maintenance and switching functions.
ARTICLE VIII
REPORTS AND COMMUNICATIONS
--------------------------
Microspace will provide Customer with the following reports regarding the
operation of the satellite and the associated TT&C facilities:
8.01 Anomalous Operation Notification. Microspace shall notify Customer
--------------------------------
as soon as possible by telephone with prompt written confirmation of any
significant incidents that have been brought to its attention by Hughes which
have a material effect on Microspace's Transponder. Microspace also shall notify
Customer promptly of any circumstances that Hughes has brought to its attention
which make it clearly ascertainable or predictable that any of the incidents
described in this section will occur.
8.02 Maneuver Notification. Microspace shall notify Customer of all non-
---------------------
emergency maneuvers of The Satellite which would result in a change in the
orbital location of The Satellite within two (2) days of receiving notification
of the same from Hughes.
ARTICLE IX
USE OF TRANSPONDERS
-------------------
9.01 Use of and Right to Transponders. Customer shall have the right to
--------------------------------
use the Service, including transponder channels, provided hereunder for any
lawful purpose.
<PAGE>
9
ARTICLE X
TERMINATION
-----------
10.01 Termination by Customer. Anything set forth herein to the contrary
-----------------------
notwithstanding, upon the occurrence of any of the following events Customer may
terminate this Agreement within ninety (90) days of actual knowledge of the
events giving rise to the right to termination:
(a) Breach or Default. If Microspace commits a material breach or
-----------------
default of any of the provisions of this Agreement and such breach or default
has not been cured within thirty (30) days after receipt by Microspace of
Customer's notice of such breach or default; provided, however, that Customer
may terminate this Agreement immediately in the event that a Transponder Failure
is not corrected within two hundred forty (240) hours (as provided in Article
VI).
(b) Government Restrictions. If the performance of this Agreement
-----------------------
pursuant to the terms hereof has been prohibited by any federal, state or local
court, governmental or regulatory body, and Service has been interrupted for a
period of two hundred forty (240) hours or more as a result.
10.02 Termination by Microspace with Notice. Anything set forth herein to
-------------------------------------
the contrary notwithstanding, upon the occurrence of any of the following events
Microspace may terminate this Agreement upon ten (10) days prior notice of
intent to terminate to Customer:
(a) Breach or Default. If Customer commits a material breach or
-----------------
default of any of the provisions of this Agreement, including, but not limited
to a failure to pay timely the monthly charge due under Article IV, and such
breach or default has not been cured within thirty (30) days after receipt by
Customer of Microspace's notice of such breach or default;
(b) Governmental Restriction. If performance of this Agreement
------------------------
pursuant to the terms hereof has been prohibited by any federal, state or local
court, governmental or regulatory body, and performance by Customer has been
interrupted for a period of Two Hundred Forty (240) hours or more as a result.
10.03 Termination by Microspace Without Notice. Microspace can terminate
----------------------------------------
this Agreement immediately if the underlying transponder lease between
Microspace and Hughes (the Hughes lease) terminates for reasons beyond the
control of Microspace. Termination of the Hughes lease shall not be deemed to be
beyond the control of Microspace if it results from a default of said lease by
Microspace and
<PAGE>
10
said default has been acknowledged as such in writing by Microspace or
judicially determined to be such.
10.04 Damages. A termination of this Agreement under Sections 10.01(a) and
-------
10.02(a) shall not limit a Party's right or ability to recover damages
occasioned to such Party as a result of the other Party's breach of this
Agreement.
ARTICLE XI
DEPOSIT
-------
11.01 Deposit. No deposit required.
-------
ARTICLE XII
INDEMNIFICATION AND LIMITATION OF LIABILITY
-------------------------------------------
12.01 Limitation of Liability.
-----------------------
(a) Neither Party shall be liable for any failure of performance
hereunder due to causes beyond its control, including but not limited to acts of
God, fire, flood or other catastrophes; any law, order, regulation, direction,
action or request of the United States government, or of any other government,
including state and local governments having jurisdiction over such Party, or of
any department, agency, commission, bureau, corporation or other instrumentality
of any one or more said governments, or of any civil or military authority,
national emergencies, insurrections; riots, wars, or strikes, lockouts, work
stoppages or other labor difficulties;
(b) Except with respect to an intentional breach by Microspace of
Section 2.02 or Section 13.15, the liability of Microspace for damages or losses
of any kind arising out of its furnishing Service to the Customer hereunder
shall not include consequential damages, as defined in Section 2.02 above.
(c) Microspace shall not be liable for any act or omission of any
other entity furnishing to the Customer facilities or equipment used with the
Service nor shall Microspace be liable for any damages or losses due to the
fault or negligence of the Customer or to the failure of Customer-provided
equipment or facilities.
12.02 Indemnification by Customer. Customer shall indemnify and hold
---------------------------
Microspace and its affiliates, its and their officers, employees or agents, or
any of them, whether acting through Microspace or otherwise, harmless from and
against:
<PAGE>
11
(a) Use by Customer. All loss, liability, damage and expense,
---------------
including reasonable counsel fees due to claims for libel, slander, infringement
of copyright arising from the material transmitted by Customer over Microspace's
facilities; and any other claim resulting from any negligent or wrongful act or
omission of Customer or patrons of Customer and relating to the Service
furnished by Microspace;
(b) Misrepresentation, Breach, etc. Any and all damages occasioned
------------------------------
by, arising out of or resulting from any material misrepresentation, intentional
breach of warranty or covenant, or intentional default or intentional
nonfulfillment of any agreement on the part of Customer under this Agreement or
under any certificate, agreement, exhibit, schedule or other instrument
furnished to Microspace pursuant to this Agreement or in connection with any of
the transactions contemplated hereby;
(c) Defense of Third Party Claims. Microspace shall notify Customer
-----------------------------
within ten (10) days of its being served with a lawsuit, and otherwise within
thirty (30) days of its actual knowledge of the occurrence of any event or of
its discovery of any facts, which in its opinion entitle or may entitle it to
indemnification from a third party claim under this Article. Microspace's
failure to do so shall preclude it from seeking indemnification hereunder unless
such failure has not prejudiced the Customer's ability to defend such claim.
Customer shall promptly defend such claim by counsel of its own choosing at its
own cost and expense and Microspace shall cooperate with Customer in the defense
of such claim including the settlement of the matter on the basis stipulated by
Customer (with Customer being responsible for all costs and expenses of such
settlement). If Customer within reasonable time after notice of a claim fails
to defend Microspace, Microspace shall be entitled to undertake the defense,
compromise or settlement of such claim at the expense of and for the account and
risk of Customer.
(d) Right to Defend. If there is a reasonable probability that
---------------
resolution of a claim in the manner provided in paragraph (c) above will
materially and adversely affect Microspace, Microspace shall have the right, at
its own cost and expense, to defend, compromise or settle such claim against it.
(e) Claim Against Third Party. If the facts giving rise to
-------------------------
indemnification hereunder shall involve a possible claim by Microspace against a
third party, Microspace shall have the right, at its own costs and expense, to
undertake the prosecution, compromise and settlement of such claim;
(f) Release. Customer will not, without Microspace's consent, settle
-------
or compromise any claim or consent to any entry of judgment which does not
include as a term thereof an unconditional
<PAGE>
12
release by the claimant or plaintiff of Microspace from all liability with
respect to such claim.
ARTICLE XIII
MISCELLANEOUS
-------------
13.01 Public Notice, Confidentiality and Proprietary Information.
----------------------------------------------------------
Notwithstanding any termination of this Agreement, Microspace and Customer shall
hold in confidence the information contained in this Agreement, and Microspace
and Customer hereby acknowledge that all information related to this Agreement
is confidential and proprietary and is not to be disclosed to third persons,
without the prior consent of both Microspace and Customer. Neither Microspace
nor Customer shall disclose to any third party (other than Hughes), the
existence of, or any of the terms and provisions of, this Agreement except as
provided in this section 13.01. Neither Party shall issue a public notice or a
news release concerning this Agreement and the transactions contemplated hereby
without the prior approval of the other Party, which approval shall include the
right to approve the form, content and timing of any such release. To the extent
that either Party discloses additional information which it considers
proprietary, it shall identify such information as proprietary when disclosing
it to the other Party by marking it clearly and conspicuously as proprietary
information; provided, however, that Microspace understands and agrees that the
names and locations of Customer's patrons and affiliates are confidential and
proprietary and need not be identified as such at the time of disclosure to
Microspace. Any proprietary disclosure to either party, if made orally, shall be
promptly confirmed in writing and identified as proprietary information, if the
disclosing party wishes to keep such information proprietary under this
Agreement. Any such information disclosed under this Agreement shall be used by
the recipient thereof only in its performance under this Agreement.
Notwithstanding the foregoing, neither Party shall be liable for disclosure or
use of such proprietary information (but shall notify the other Party prior to
such disclosure or use) which is:
(a) Applicable Law. Required to be disclosed to the extent necessary
--------------
to comply with law or the valid order of a governmental agency or court of
competent jurisdiction;
(b) Internal Business Matter. Disclosed as part of its normal
------------------------
procedures to its officers, directors, parent company, auditors and attorneys,
each of whom shall agree to be bound by the provisions and spirit of this
Section;
(c) Enforcement of Rights. Disclosed in order to enforce its rights
---------------------
and perform its obligations pursuant to this Agreement;
<PAGE>
13
(d) Financing and Disposition. Disclosed to the extent necessary as
-------------------------
part of a sale, lease or financing arrangement, to its purchasers, lessees,
investment bankers, independent auditors or legal counsel and their agents,
representatives or independent contractors or any financial institution;
provided, however, that such parties shall agree in writing to be bound by the
provisions and spirit of this Section;
(e) Public Information. Available or becomes available to the public
------------------
from a source other than the receiving Party before or during the period of this
Agreement, is lawfully obtained by the receiving Party from a third party or
parties, or is known by the receiving Party prior to such disclosure;
(f) Release. Released without restrictions in writing by the
-------
disclosing Party; or
(g) Independent Development. At any time developed by the receiving
-----------------------
Party completely independent of and prior to any such disclosure or disclosures
from the disclosing Party when such development can be documented to have
occurred prior to a disclosure. No license to the other Party, under any
patents, is granted or implied by conveying proprietary information or other
information to that Party.
Notwithstanding the foregoing, the existence (but note the material terms)
of this Agreement may be disclosed to the patrons and affiliates of Customer to
the extent necessary to establish proper transmission of music and other
communications services to such individuals and entities through the leased
transponder channels.
13.02 Not Fiduciaries. Nothing contained in this Agreement shall be deemed
---------------
or construed by the Parties hereto or by any third party to create any rights,
obligations or interests in third parties; to create the relationship of
principal and agent, partnership or joint venture or of any other fiduciary
relationship or association between the Parties.
13.03 Waiver. No failure on the part of either Party to notify the other
------
Party of any noncompliance hereunder, and no failure on the part of either Party
to exercise its rights hereunder shall prejudice any remedy for any subsequent
noncompliance, and any waiver by either Party of any breach or noncompliance
with any term or condition of this Agreement shall be limited to the particular
instance and shall not operate or be deemed to waive any future breaches or
noncompliance with any term or condition. All remedies and rights hereunder and
those available in law or in equity shall be cumulative and the exercise by a
Party of any such right or remedy shall not preclude the exercise of any other
right or remedy available under this Agreement in law or in equity.
<PAGE>
14
13.04 Assignment and Binding Effect. This Agreement may be assigned by
-----------------------------
either Party to a third party during the term of this Agreement without the
written consent of the other Party.
13.05 Taxes. Customer shall not be responsible for any taxes and similar
-----
liabilities, including sales, use, income and personal property taxes, which may
be required under any federal, state or local laws with respect to the
Transponders used by Customer hereunder.
13.06 Expenses. Except as otherwise provided herein, each Party hereto
--------
shall bear its own expenses incurred in connection with the transactions
pursuant to this Agreement.
13.07 Construction, Etc. This Agreement shall be construed and enforced
-----------------
in accordance with the internal substantive laws of the State of North Carolina
except for conflicts of laws. The Parties hereby consent and submit to the
jurisdiction of the federal and state courts located in the State of North
Carolina, and any action or suit under this Agreement may be brought by the
Parties in any federal or state court with appropriate jurisdiction over the
subject matter established or sitting in the State of North Carolina. The
Parties shall not raise in connection therewith, and hereby waive, any defenses
based upon the venue, the inconvenience of the forum, the lack of personal
jurisdiction, the sufficiency of service of process or the like in any such
action or suit brought in the State of North Carolina. If any action or
proceeding is brought for the enforcement of this Agreement, the successful or
prevailing party or parties shall be entitled to recover reasonable attorneys'
fees and other costs incurred in the action or proceeding, in addition to any
other relief to which it or they may be entitled.
13.08 Notices. All necessary notices, demands, reports, orders and
-------
requests required or permitted hereunder shall be deemed to be duly given only
if and on the date mailed by certified or registered United States mail, postage
prepaid, or delivered by hand and addressed as follows:
(a) If to be given to Microspace:
Mr. Keith N. Smith
Microspace Communications Corporation
3100 Highwoods Blvd.
Raleigh, NC 27604
and
<PAGE>
15
Mr. James F. Goodmon
Capitol Broadcasting Company
711 Hillsborough Street
Box 12800, Raleigh, NC 27605
(b) If to be given to Customer:
Mr. John R. Jester
Muzak Limited Partnership
400 North 34th Street, Suite 200
Seattle, WA 98103
or to such other addresses as the Parties may specify in writing.
13.09 Headings. The headings of the Articles, Sections, Paragraphs and
--------
Subparagraphs of this Agreement are inserted as a matter of convenience and for
reference purposes only, are of no binding effect, and in no respect define,
limit or describe the scope of this Agreement or the intent of any provision
hereof.
13.10 Exhibits. All Exhibits attached to this Agreement shall be deemed
--------
part of this Agreement and incorporated herein as if fully set forth herein, and
in the event of a variation or an inconsistency between this Agreement and the
Exhibits attached hereto, the Agreement shall govern.
13.11 Ambiguities. This Agreement and the Exhibits hereto have been
-----------
drafted jointly by the Parties and in the event of any ambiguities in the
language hereof, there shall be no inference drawn in favor of either Party.
13.12 Entire Agreement. This Agreement, including the "WHEREAS" clauses on
----------------
Page 1, and all Exhibits hereto, represent the entire understanding and
agreement between the Parties hereto with respect to the subject matter hereof,
supersede all prior negotiations between such Parties with respect to such
subject matter, and can be amended, supplemented or changed only by an agreement
in writing which makes specific reference to this Agreement and which is signed
by both Parties.
13.13 Counterparts. This agreement may be signed in counterpart and in
------------
multiple copies, and each such copy having all signatures attached thereto shall
constitute an original hereof.
13.14 Technical Support. During the term of this Agreement, Microspace
-----------------
will provide technical and operational support to Customer with respect to
transmission frequency planning and equipment
<PAGE>
16
modulation configuration, transmit channel additions, software interface
requirements and headend equipment interface standards.
13.15 Hughes Communications Lease. Microspace hereby affirms and agrees
---------------------------
that it will use its best efforts properly to perform its obligations and
exercise its rights under the Hughes lease for the benefit of Customer as well
as itself and that, as afforded by the Hughes lease, in the event of its default
under such lease, Customer shall have the right (contingent on approval by
Hughes) to assume Microspace's rights and obligations under said lease to the
extent necessary to provide continued access to the transponder channels leased
by Customer under this Agreement. In the event of default, Microspace will use
its reasonable best efforts to seek Hughes' consent to assignment of the
transponder lease to Customer. Unless Microspace's breach of this Section 13.15
is intentional, Microspace will not be liable to Customer for consequential
damages, as defined in Section 2.02, for such breach. For purposes of this
provision, Microspace shall be deemed to be in default of the Hughes lease if
such default is acknowledged by it in writing or is judicially determined.
13.16 Representations and Warranties. Microspace represents and warrants
-------------------------------
that, as of the date hereof, its lease with Hughes is a valid and binding lease
of the Transponder channels that are the subject of this Agreement, it has
performed its obligations and is in good standing under the Hughes lease, and it
knows of no breach or default by Hughes of the Hughes lease. Each of the Parties
hereto further represents and warrants to the other that, as of the date hereof,
(i) it has all necessary rights and powers to enter into and fully perform this
Agreement, (ii) this Agreement constitutes a valid and binding obligation of
such Party, (iii) it has no knowledge of any agreement or arrangement which
conflict with this Agreement or which limit or could reasonably be expected to
limit the performance of its obligations under this Agreement, and (iv) it is in
full compliance with all local, state, and federal laws, rules, and regulations
applicable to its performance of this Agreement. In the event of a material
breach of the foregoing representation and warranties, Customer (if the
breaching Party) shall indemnify and hold harmless Microspace and its
affiliates, its and their officers, employees or agents, or any of them, as
provided in Section 12.02, and Microspace (if the breaching Party) shall
indemnify and hold harmless Customer and its affiliates, its and their officers,
employees or agents, or any of them, from and against any and all damages
occasioned by, arising out of or resulting from such breach.
<PAGE>
17
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
MICROSPACE COMMUNICATIONS CORPORATION
By: /s/ Keith N. Smith
-----------------------------------
Keith N. Smith
Vice President and General Manager
Attest: /s/ Susan A. Keith
-------------------------------
MUZAK LIMITED PARTNERSHIP
By: /s/ Thomas J. Gentry
-----------------------------------
Thomas J. Gentry
Vice President/General Manager
Attest: /s/ Susan A. Keith
-------------------------------
<PAGE>
EXHIBIT 10.22
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been
separately filed with the Commission.
TRANSMISSION LEASE AGREEMENT
----------------------------
THIS AGREEMENT, made and entered into this 31st day of January, 1995, by
------
and between Microspace Communications Corporation, a North Carolina corporation
("Microspace"), and Muzak Limited Partnership, a limited partnership with
principal offices in Seattle, Washington ("Customer").
WITNESSETH:
WHEREAS, Microspace offers SCPC satellite transmission services; and
WHEREAS, Customer desires Microspace to provide such services; and
WHEREAS, Microspace desires to provide such services to Customer pursuant
to the terms and conditions hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein made, the Parties, intending to be legally bound, hereby
mutually agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
meanings:
1.01 "Agreement" means this Agreement;
1.02 "Parties" means the signatories to this Agreement and a "Party" means
one of such signatories;
1.03 "Transmission Specifications" means those specifications for
transmission as defined in Exhibit A;
1.04 "Interruption of Service" shall mean any time the transmission fails
to meet any of the Transmission Specifications.
1.05 "Customer's Signal" means the complete intelligence to be transmitted
to Customer's Transponder on behalf of Customer pursuant to this Agreement.
<PAGE>
ARTICLE II
SERVICE
-------
2.01 Transmission Service. Beginning March 1, 1994, Customer shall take
--------------------
full-time (i.e., 24 hours per day, 7 days a week) transmission service from
Microspace.
2.02 Uplink Facilities. Microspace shall provide transmitting equipment
-----------------
and related facilities (hereinafter "Uplink Facilities") sufficient to transmit
Customer's Signals from the ground to Microspace's Transponder subject to the
following conditions:
(a) The Uplink Facilities shall be located in or near Raleigh, North
Carolina;
(b) Microspace will provide, operate and maintain transmitting
equipment which will be capable of sending Customer's Signal to Microspace's
Transponder if Customer's Signal is configured so that it is technically
compatible with the transmitting equipment provided by Microspace;
(c) Microspace will operate the Uplink Facilities in a reasonable
manner consistent with the type of equipment located thereon. Unless Microspace
commits an intentional breach, it will not be liable for consequential damages
for breach of this provision. As used herein, "consequential damages" includes
revenues lost to Customer as a result of the inability of Customer to transmit
Customers Signal but does not mean the costs incurred by Customer in replacing
damaged property or in securing replacement facilities or replacement
transponder capacity;
(d) Customer will adhere to all reasonable rules and regulations
established by Microspace for the Uplink Facilities, including, but not limited
to, access by third persons;
(e) The Uplink Facilities provided by Microspace shall include
facilities to allow for the downlink of Customer's Signal from other satellites,
including those operating in C-band, for re-transmission to Microspace's
Transponder;
(f) Microspace will provide Customer space within a building at the
Uplink Facilities sufficient to accommodate standard Wegener or equivalent
modulation equipment required for transmission of Customer's channels as defined
in the Exhibits of this Agreement. Customer will pay no rent for said space.
Additional rack space will be leased to Customer, if requested, at rates to be
agreed upon, subject to space available:
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
(i) All taxes or assessments which are incurred as the result of the
installation and operation of Customer's equipment will be paid by Customer in a
timely manner;
(ii) Microspace will provide electric power and temporary emergency
backup electrical power for the operation of Customer's equipment without
charge. Microspace will use all reasonable efforts to maintain a suitable
environment within the building to support the operation of standard electrical
devices typically installed in Uplink Facilities;
(iii) Microspace will not be responsible for damage to or destruction
of Customer's equipment located at the Uplink Facilities unless the damage or
destruction is caused by Microspace's gross negligence or willful misconduct.
2.03 Option to Add Additional Channels. Customer shall have the option to
---------------------------------
add two (2) additional channels during the term of this Agreement.
ARTICLE III
SERVICE TERM
------------
3.01 Term. Customer shall begin taking service as provided herein for a
----
term commencing on March 1, 1994, and ending Sixty (60) months after the start
date of this Agreement. Customer may terminate this Agreement during the first
eighteen (18) months of the Agreement term upon thirty (30) days written notice
to Microspace.
ARTICLE IV
MONTHLY CHARGE AND METHOD OF PAYMENT
------------------------------------
4.01 Monthly Charge. Customer shall pay to Microspace monthly, in
--------------
advance, the sum of [**]
Customer shall have the option to add up to two (2) additional
channels, each at an additional [**] per month.
If the term should not commence on the first day of a month or end on
the last day of a month, the monthly charge for the fractional part of the month
shall be calculated at a daily rate of one-thirtieth of the monthly charge
specified in Paragraph 4.01.
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commmission.
All payments shall be made to Microspace at its address as designated
in Section 8.06 and shall be deemed to be made upon receipt thereof by
Microspace.
4.02 [**]
ARTICLE V
INTERRUPTION OF TRANSMISSIONS
-----------------------------
5.01 Outage Allowance. If applicable, Microspace shall grant Customer an
----------------
Outage Allowance, as follows:
If an Interruption of Service occurs, then for each full hour of such
Interruption of Service, Microspace shall grant Customer a pro rata Outage
Allowance based on the monthly charge for Customer's Transmission Service and
the length of the Interruption of Service, calculated pursuant to the equation
below. Any such outage allowance shall be applied to the next succeeding
monthly billing to Customer and shall not in any case exceed one (1) month's
standard billing. As used herein, "Interruption of Service" shall mean the
aggregate period (in minutes) -- only where such aggregation exceeds thirty (30)
minutes in any consecutive thirty (30) day period -- during which an
Interruption of Service occurs. For purposes of this Agreement, an Interruption
of Service shall be measured from the time Microspace receives notice from
Customer of the Interruption of Service until the time transmission has been
restored.
Outage Allowance = Interruption of Service (in Minutes) X Monthly Lease
Payment
----------------------------------------------------
43,200 Minutes/Month
In no case shall an Outage Allowance be made for any Interruption of
Service related to: (i) any failure on the part of Customer to perform its
transmission or other material or operational obligations pursuant to this
Agreement, (ii) failure of facilities provided by Customer, (iii) reasonable
periodic maintenance, (iv) interference from third party transmission or usage,
(v) cooperative testing or (vi) any other act or failure to act by Customer.
<PAGE>
(c) An allowance will not be made where the interruption is a result
of, or attributable in whole or in part, to:
(1) The Customer's negligence or willful acts, or the negligence
or willful acts of its officers, directors, agents, employees, subsidiaries,
affiliates, customers, or any of them;
(2) The failure of the Signal provided by Customer or by carriers
other than Microspace in accordance with the Customer's instructions or the
failure of transmission lines or equipment provided by the Customer, its
customers, or any of them; or
(3) The failure or nonperformance of any earth station not
provided by Microspace.
5.03 Credit Memoranda. Creditable interruptions shall be acknowledged by
----------------
Microspace through the issuance of credit memoranda. Such memoranda shall be
issued within fifteen (15) days of the close of each calendar month and shall
reflect all credit allowances accumulated by Customer during such month.
Customer may deduct from its next monthly payment the amount specified in the
credit memorandum received in the preceding month.
5.04 Resolution of Credit Disputes. In the event that Microspace and
-----------------------------
Customer cannot agree on the amount of credit due Customer following an
interruption, Customer may withhold payment of the disputed amount until
Microspace and Customer resolve the dispute; provided, however, that should a
credit dispute or disputes arise totalling two months service fees or more in
the aggregate, Microspace or Customer may cancel this Agreement on thirty (30)
days written notice and pursue all legal remedies available to resolve the
dispute, including claims of breach for wrongful termination.
ARTICLE VI
TERMINATION
-----------
6.01 Termination by Customer. Anything set forth herein to the contrary
-----------------------
notwithstanding, upon the occurrence of any of the following events Customer may
terminate this Agreement within ninety (90) days of actual knowledge of the
events giving rise to the right to termination:
(a) Breach or Default. If Microspace commits a material breach or
-----------------
default of any of the provisions of this Agreement and such breach or default
has not been cured within thirty (30) days after receipt by Microspace of
Customer's notice of such breach or default;
<PAGE>
(b) Government Restrictions. If the performance of this Agreement
-----------------------
pursuant to the terms hereof has been prohibited by any federal, state or local
court, governmental or regulatory body, and service has been interrupted for a
period of two hundred forty (240) hours or more as a result.
6.02 Termination by Microspace with Notice. Anything set forth herein to
-------------------------------------
the contrary notwithstanding, upon the occurrence of any of the following events
Microspace may terminate this Agreement upon ten (10) days prior notice of
intent to terminate to Customer:
(a) Breach or Default. If Customer commits a material breach or
-----------------
default of any of the provisions of this Agreement, including, but not limited
to a failure to pay timely the monthly charge due under Article IV, and such
breach or default has not been cured within ten (10) days after receipt by
Customer of Microspace's notice of such breach or default;
(b) Governmental Restriction. If performance of this Agreement
------------------------
pursuant to the terms hereof has been prohibited by any federal, state or local
court, governmental or regulatory body, and performance by Customer has been
interrupted for a period of two hundred forty (240) hours or more as a result.
ARTICLE VII
INDEMNIFICATION AND LIMITATION OF LIABILITY
-------------------------------------------
7.01 Limitation of Liability.
-----------------------
(a) Neither Party shall not be liable for any failure of performance
hereunder due to causes beyond its control, including but not limited to acts of
God; fire, flood or other catastrophes; any law, order, regulation, direction,
action or request of the United States government, or of any other government,
including state and local governments having jurisdiction over such Party, or of
any department, agency, commission, bureau, corporation or other instrumentality
of any one or more said governments, or of any civil or military authority,
national emergencies, insurrections; riots, wars, or strikes, lockouts, work
stoppages or other labor difficulties;
(b) The liability of Microspace for damages or losses of any kind
arising out of its furnishing service to the Customer and caused by Microspace
shall in no event exceed an amount equal to the proportionate part of its fixed
monthly charge allocable to the faulty service as specified in Section 5.01;
(c) Microspace shall not be liable for any act or omission of any
other entity furnishing to the Customer facilities or equipment used
<PAGE>
with the service nor shall Microspace be liable for any damages or losses due to
the fault or negligence of the Customer or to the failure of Customer-provided
equipment or facilities.
(d) Except with respect to an intentional breach by Microspace of
Section 2.02, the liability of Microspace for damages or losses of any kind
arising out of its furnishing Service to the Customer hereunder shall not
include consequential damages, as defined in Section 2.02 above;
7.02 Indemnification by Customer. Customer shall indemnity and hold
---------------------------
Microspace and its affiliates, its and their officers, employees or agents, or
any of them, whether acting through Microspace or otherwise, harmless from and
against:
(a) Use by Customer. All loss, liability, damage and expense,
---------------
including reasonable counsel fees due to claims for libel, slander, infringement
of copyright arising from the material transmitted by Customer over Microspace's
facilities; and any other claim resulting from any negligent or wrongful act or
omission of Customer or patrons of Customer and relating to the Service
furnished by Microspace;
(b) Misrepresentation, Breach, etc. Any and all damages occasioned
-------------------------------
by, arising out of or resulting from any material misrepresentation, intentional
breach of warranty or covenant, or intentional default or intentional
nonfulfillment of any agreement on the part of Customer under this Agreement or
under any certificate, agreement, exhibit, schedule or other instrument
furnished to Microspace pursuant to this Agreement or in connection with any of
the transactions contemplated hereby;
(c) Defense of Third Party Claims. Microspace shall notify Customer
-----------------------------
within ten (10) days of its being served with a lawsuit, and otherwise within
thirty (30) days of its actual knowledge of the occurrence of any event, or of
its discovery of any facts, which in its opinion entitle or may entitle it to
indemnification from a third party claim under this Article. Microspace's
failure to do so shall preclude it from seeking indemnification hereunder unless
such failure has not prejudiced the Customer's ability to defend such claim.
Customer shall promptly defend such claim by counsel of its own choosing at its
own cost and expense and Microspace shall cooperate with Customer in the defense
of such claim including the settlement of the matter on the basis stipulated by
Customer (with Customer being responsible for all costs and expenses of such
settlement). If Customer within reasonable time after notice of a claim fails to
defend Microspace, Microspace shall be entitled to undertake the defense,
compromise or settlement of such claim at the expense of and for the account and
risk of Customer;
<PAGE>
(d) Right to Defend. If there is a reasonable probability that
---------------
resolution of a claim in the manner provided in paragraph (c) above will
materially and adversely affect Microspace, Microspace shall have the right, at
its own cost and expense, to defend, compromise or settle such claim against it;
(e) Claim Against Third Party. If the facts giving rise to
-------------------------
indemnification hereunder shall involve a possible claim by Microspace against a
third party, Microspace shall have the right, at its own costs and expense, to
undertake the prosecution, compromise and settlement of such claim;
(f) Release. Customer shall not, without Microspace's consent, settle
-------
or compromise any claim or consent to any entry of judgment which does not
include as a term thereof an unconditional release by the claimant or plaintiff
of Microspace from all liability with respect to such claim.
ARTICLE VIII
MISCELLANEOUS
-------------
8.01 Not Fiduciaries. Nothing contained in this Agreement shall be deemed
---------------
or construed by the Parties hereto or by any third party to create any rights,
obligations or interests in third parties; to create the relationship of
principal and agent, partnership or joint venture or of any other fiduciary
relationship or association between the Parties.
8.02 Waiver. No failure on the part of either Party to notify the other
------
Party of any noncompliance hereunder, and no failure on the part of either Party
to exercise its rights hereunder shall prejudice any remedy for any subsequent
noncompliance, and any waiver by either Party of any breach or noncompliance
with any term or condition of this Agreement shall be limited to the particular
instance and shall not operate or be deemed to waive any future breaches or
noncompliance with any term or condition. All remedies and rights hereunder and
those available in law or in equity shall be cumulative and the exercise by a
Party of any such right or remedy shall not preclude the exercise of any other
right or remedy available under this Agreement in law or in equity.
8.03 Assignment and Binding Effect. This Agreement may be assigned by
-----------------------------
either Party to a third party during the term of this Agreement without the
written consent of the other Party.
8.04 Expenses. Except as otherwise provided herein, each Party hereto
--------
shall bear its own expenses incurred in connection with the transactions
pursuant to this Agreement.
<PAGE>
8.05 Construction. This Agreement shall be construed and enforced in
------------
accordance with the internal substantive laws of the State of North Carolina
except for conflicts of laws. The Parties hereby consent and submit to the
jurisdiction of the federal and state courts located in the State of North
Carolina, and any action or suit under this Agreement may be brought by the
Parties in any federal or state court with appropriate jurisdiction over the
subject matter established or sitting in the State of North Carolina. The
Parties shall not raise in connection therewith, and hereby waive, any defenses
based upon the venue, the inconvenience of the forum, the lack of personal
jurisdiction, the sufficiency of service of process or the like in any such
action or suit brought in the State of North Carolina. If any action or
proceeding is brought for the enforcement of this Agreement, the successful or
prevailing party or parties shall be entitled to recover reasonable attorneys'
fees and other costs incurred in the action or proceeding, in addition to any
other relief to which it or they may be entitled.
8.06 Notices. All necessary notices, demands, reports, orders and
-------
requests required or permitted hereunder shall be deemed to be duly given only
if and on the date mailed by certified or registered United States mail, postage
prepaid, or delivered by hand and addressed as follows:
(a) If to be given to Microspace:
Mr. Keith N. Smith
Microspace Communications Corporation
3100 Highwoods Blvd., Suite 120
Raleigh, NC 27604
and
<PAGE>
Mr. James F. Goodmon
Capitol Broadcasting Company
711 Hillsborough Street
Box 12800, Raleigh, NC 27605
(b) If to be given to Customer:
Mr. Thomas J. Gentry
Muzak DBS Division
3100 Highwoods Blvd.
Raleigh, NC 27604
and
Mr. John R. Jester
Muzak Limited Partnership
400 North 34th Street
Suite 200
Seattle, WA 98103
or to such other addresses as the Parties may specify in writing.
8.07 Headings. The headings of the Articles, Sections, Paragraphs and
--------
Subparagraphs of this Agreement are inserted as a matter of convenience and for
reference purposes only, are of no binding effect, and in no respect define,
limit or describe the scope of this Agreement or the intent of any provision
hereof.
8.08 Exhibits. All Exhibits attached to this Agreement shall be deemed
--------
part of this Agreement and incorporated herein as if fully set forth therein,
and in the event of a variation or an inconsistency between this Agreement and
the Exhibits attached hereto, the Agreement shall govern.
8.09 Ambiguities. This Agreement and the Exhibits hereto have been
-----------
drafted jointly by the Parties and in the event of any ambiguities in the
language hereof, there shall be no inference drawn in favor of either Party.
8.10 Entire Agreement. This Agreement, including the "WHEREAS" clauses on
----------------
Page 1, and all Exhibits hereto, represent the entire understanding and
agreement between the Parties hereto with respect to the subject matter hereof,
supersede all prior negotiations between such Parties, and can be amended,
supplemented or changed only by an agreement in writing which makes specific
reference to this Agreement and which is signed by both Parties.
<PAGE>
8.11 Counterparts. This Agreement may be signed in counterpart and in
------------
multiple copies, and each such copy having all signatures attached thereto shall
constitute an original hereof.
8.12 Public Notice, Confidentiality and Proprietary Information.
----------------------------------------------------------
Notwithstanding any termination of this Agreement, Microspace and Customer shall
hold in confidence the information contained in this Agreement, and Microspace
and Customer hereby acknowledge that all information related to this Agreement
is confidential and proprietary and is not to be disclosed to third persons,
without the prior consent of both Microspace and Customer. Neither Microspace
nor Customer shall disclose to any third party the existence of, or any of the
terms and provisions of, this Agreement except as provided in this Section 8.12.
Neither Party shall issue a public notice or a news release concerning this
Agreement and the transactions contemplated hereby without the prior approval of
the other Party, which approval shall include the right to approve the form,
content and timing of any such release. To the extent that either Party
discloses additional information which it considers proprietary, it shall
identify such information as proprietary when disclosing it to the other Party
by marking it clearly and conspicuously as proprietary information; provided,
however, that Microspace understands and agrees that the names and locations of
Customer's patrons and affiliates are confidential and proprietary and need not
be identified as such at the time of disclosure to Microspace. Any proprietary
disclosure to either Party, if made orally, shall be promptly confirmed in
writing and identified as proprietary information, if the disclosing Party
wishes to keep such information proprietary under this Agreement. Any such
information disclosed under this Agreement shall be used by the recipient
thereof only in its performance under this Agreement. Notwithstanding the
foregoing, neither Party shall be liable for disclosure or use of such
proprietary information (but shall notify the other Party prior to such
disclosure or use) which is:
(a) Applicable Law. Required to be disclosed to the extent necessary
--------------
to comply with law or the valid order of a governmental agency or court of
competent jurisdiction;
(b) Internal Business Matter. Disclosed as part of its normal
------------------------
procedures to its officers, directors, parent company, auditors and attorneys,
each of whom shall agree to be bound by the provisions and spirit of this
Section;
(c) Enforcement of Rights. Disclosed in order to enforce its rights
---------------------
and perform its obligations pursuant to this Agreement;
(d) Financing and Disposition. Disclosed to the extent necessary as
-------------------------
part of a sale, lease or financing arrangement, to its purchasers, lessees,
investment bankers, independent auditors or legal counsel and their agents,
representatives or independent contractors or
<PAGE>
any financial institution; provided, however, that such parties shall agree in
writing to be bound by the provisions and spirit of this Section;
(e) Public Information. Available or becomes available to the public
------------------
from a source other than the receiving Party before or during the period of this
Agreement, is lawfully obtained by the receiving Party from a third party or
parties, or is known by the receiving Party prior to such disclosure;
(f) Release. Released without restrictions in writing by the
-------
disclosing Party; or
(g) Independent Development. At any time developed by the receiving
-----------------------
Party completely independently of and prior to any such disclosure or
disclosures from the disclosing Party when such development can be documented to
have occurred prior to a disclosure. No license to the other Party, under any
patents, is granted or implied by conveying proprietary information or other
information to that Party.
Notwithstanding the foregoing, the existence (but not the material
terms) of this Agreement may be disclosed to the patrons and affiliates of
Customer to the extent necessary to establish proper transmission of music and
other communications services to such individuals and entities through the
leased transponder channels.
8.13 Taxes. Customer shall not be responsible for any taxes and similar
-----
liabilities, including sales, use, income and personal property taxes, which may
be required under any federal, state or local laws with respect to the
Transponders used by Customer hereunder.
8.14 Expenses. Except as otherwise provided herein, each Party hereto
--------
shall bear its own expenses incurred in connection with the transactions
pursuant to this Agreement.
8.15 Technical Support. During the term of this Agreement, Microspace
-----------------
will provide technical and operational support to Customer with respect to
transmission frequency planning and equipment modulation configuration, transmit
channel additions, software interface requirements and headend equipment
interface standards.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
MICROSPACE COMMUNICATIONS CORPORATION
By: /s/ Keith N. Smith
-----------------------------------
Keith N. Smith
Vice President and General Manager
Attest: [SIGNATURE ILLEGIBLE]
--------------------------------
MUZAK LIMITED PARTNERSHIP
By: /s/ Thomas J. Gentry
-----------------------------------
Thomas J. Gentry
Vice President and General Manager
Muzak DBS Division
Attest: /s/ Susan A. Keith
-------------------------------
<PAGE>
Exhibit 10.23
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been
separately filed with the Commission.
TRANSPONDER LEASE AGREEMENT
---------------------------
THIS AGREEMENT, made and entered into this 31st day of January, 1995, by
----
and between Microspace Communications Corporation, a North Carolina corporation
("Microspace"), and Muzak Limited Partnership, a limited partnership with
principal offices in Seattle, Washington ("Customer").
WITNESSETH:
WHEREAS, Microspace has leased transponder capacity on the Galaxy VII Ku-
band domestic communications satellite operated by Hughes Communications Galaxy
Inc. (Hughes); and
WHEREAS, Customer desires to use part of the transponder capacity leased by
Microspace for the purpose of SCPC transmission; and
WHEREAS, Microspace desires to provide such Service to Customer pursuant to
the terms and conditions hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein made, the Parties, intending to be legally bound, hereby
mutually agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
meanings:
1.01 "Agreement" means this Agreement.
1.02 "Galaxy VII" means the domestic communications satellite designed to
operate in the Ku-band, positioned at the 91 degrees W.L. orbital position.
1.03 "Microspace's Transponder" means that portion of a transponder or
transponders on Galaxy VII leased from Hughes by Microspace.
1.04 "Parties" means the signatories to this Agreement and a "Party" means
one of such signatories.
1.05 "Transponder" or "Transponders" means Microspace's Transponder.
Page 1
<PAGE>
1.06 "Transponder Failure" means with respect to Microspace's Transponder,
any of the following events:
(a) Twenty (20) or more "outage units" shall occur within any thirty
(30) consecutive days (an outage unit being an interruption of Microspace's
Transponder such that an Outage Allowance is due under Article V of this
Agreement);
(b) Microspace's Transponder shall fail to meet Transponder
Performance Specifications for twelve (12) consecutive days.
1.07 "Transponder Performance Specifications" means those specifications
for the design and performance of the Galaxy VII Transponders contained in
Exhibit A.
1.08 "Transponder Spares" means certain redundant transponder equipment
units which are designed as substitutes for equipment component units, the
failure of which could cause a transponder to fail to meet the Transponder
Performance Specifications.
1.09 "Customer"s Signal" means the complete intelligence to be transmitted
to Microspace's Transponder on behalf of Customer pursuant to this Agreement.
1.10 "Service" means the Transponder Capacity leased by Customer from
Microspace.
ARTICLE II
SERVICE
-------
2.01 Transponder Service. Beginning June 1, 1994, Customer shall take
-------------------
full-time Service from Microspace as specified in Exhibit B, "Technical
Specifications", Part 1, "Individual Subcarrier Specifications". During the
term of this Agreement, Microspace shall provide transponder capacity to
Customer, subject and according to the terms hereof, on a full-time (24 hours a
day, 7 days a week) basis.
2.02 Orbital Location. Customer's Transponder Capacity shall be provided
----------------
from the 91 degrees W.L. orbital location.
2.03 Uplink Facilities. Microspace shall provide transmitting equipment
-----------------
and related facilities (hereinafter "Uplink Facilities") sufficient to transmit
Customer's Signals from the ground to Microspace's Transponder subject to the
following conditions:
Page 2
<PAGE>
(a) The Uplink Facilities shall be located in or near Raleigh, North
Carolina;
(b) Microspace will provide, operate and maintain transmitting
equipment which will be capable of sending Customer's Signal to Microspace's
Transponder if Customer's Signal is configured so that it is technically
compatible with the transmitting equipment provided by Microspace;
(c) Microspace will operate the Uplink Facilities in a reasonable
manner consistent with the type of equipment located thereon. Unless Microspace
commits an intentional breach, it will not be liable for consequential damages
for breach of this provision. As used herein, "consequential damages" includes
revenues lost to Customer as a result of the inability of Customer to transmit
Customer's Signal but does not mean the costs incurred by Customer in replacing
damaged property or in securing replacement facilities or replacement
transponder capacity;
(d) Customer will adhere to all reasonable rules and regulations
established by Microspace for the Uplink Facilities, including, but not limited
to, access by third persons;
(e) The Uplink Facilities provided by Microspace shall include
facilities to allow for the downlink of Customer's Signal from other satellites,
including those operating in C-band, for re-transmission to Microspace's
Transponder;
(f) Microspace will provide Customer space within a building at the
Uplink Facilities sufficient to accommodate standard Wegener or equivalent
modulation equipment required for transmission of Customer's channels as defined
in the Exhibits of this Agreement. Customer will pay no rent for said space.
Additional rack space will be leased to Customer, if requested, at rates to be
agreed upon, subject to space available:
(i) All taxes or assessments which are incurred as the result of
the installation and operation of Customer's equipment will be paid by Customer
in a timely manner;
(ii) Microspace will provide electric power and temporary
emergency backup electrical power for the operation of Customer's equipment
without charge. Microspace will use all reasonable efforts to maintain a
suitable environment within the building to support the operation of standard
electrical devices typically installed in Uplink Facilities;
Page 3
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
(iii) Microspace will not be responsible for damage to or
destruction of Customer's equipment located at the Uplink Facilities unless the
damage or destruction is caused by Microspace's gross negligence or willful
misconduct.
ARTICLE III
SERVICE TERM
------------
3.01 Term. Customer shall begin taking Service as provided herein
----
for a term commencing June 1, 1994, and continuing until the Expiration Date, as
defined below:
"Expiration Date": Upon the earlier to occur:
(a) May 31, 1999; or
(b) The termination or cancellation of this Agreement as provided in
Article X of this Agreement.
ARTICLE IV
MONTHLY CHARGE AND METHOD OF PAYMENT
------------------------------------
4.01 Monthly Charge. Customer shall pay to Microspace monthly, in advance,
--------------
the sum of [**].
If the term should not commence on the first day of a month or end on
the last day of a month, the monthly charge for the fractional part of the month
shall be calculated at a daily rate of one-thirtieth of the monthly charge
specified in Paragraph 4.01.
All payments shall be made to Microspace at its address as designated
in Paragraph 13.08 and shall be deemed to be made upon receipt thereof by
Microspace. Microspace shall assess a late payment charge of one and one-half
percent (1.5%) compounded monthly on payments received after the due date.
Page 4
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
4.02 [**].
ARTICLE V
INTERRUPTION OF TRANSMISSIONS OVER TRANSPONDERS
-----------------------------------------------
5.01 Outage Allowance. If applicable, Microspace shall grant Customer an
----------------
Outage Allowance, as follows:
If an "Outage Allowance Failure Period" (as defined below) occurs,
then for each full hour of such Outage Allowance Failure Period Microspace shall
grant Customer a pro rata Outage Allowance based upon the monthly charge for
Customer's Transponder Capacity and the length of the Outage Allowance Failure
Period, calculated pursuant to the equation below. Any such Outage Allowance
shall be applied to the next succeeding monthly billing to Customer and shall
not in any case exceed one month's standard billing. As used herein, "Outage
Allowance Failure Period" shall mean the aggregate period (in hours) -- only
where such aggregation exceeds twelve (12) hours during any consecutive thirty
(30) day period -- during which a Transponder Capacity Failure(s) occurs. For
purposes of this Agreement, A Transponder Capacity Failure shall be measured
from the time Microspace receives notice from Customer of the Transponder
Capacity Failure until the time the Transponder has been restored to operation,
but shall not begin in any event until Customer ceases to use Customer's
Transponder Capacity.
Outage Allowance = Outage Allowance Failure Period (In Hours) X Monthly
-----------------------------------------------------------------------
Lease Payment
-------------
720 Hours/Month
In no case shall an Outage Allowance be made for any Transponder
Capacity Failure related to: (i) any failure on the part of Customer to perform
its transmission or other material or operational obligations pursuant to this
Agreement, (ii) failure of facilities provided by Customer, (iii) reasonable
periodic maintenance, (iv) interference from third party transmissions or usage,
(v) cooperative testing, except where trouble or fault is found in the
Transponder or (vi) any other act or failure to act by Customer.
Page 5
<PAGE>
5.02 Resolution of Credit Disputes. In the event that Microspace and
-----------------------------
Customer cannot agree on the amount of credit due Customer following an
interruption, Customer may withhold payment of the disputed amount until
Microspace and Customer resolve the dispute; provided, however, that should a
credit dispute or disputes arise totalling two months Service fees or more in
the aggregate, Microspace or Customer may cancel this Agreement on thirty (30)
days written notice and pursue all legal remedies available to resolve the
dispute, including claims of breach for wrongful termination.
ARTICLE VI
TRANSPONDER PROTECTION
----------------------
6.01 Restoration of Service. If Microspace's Transponder suffers a
----------------------
Transponder Failure, Customer shall remain bound by this Agreement if
Microspace's Transponder is restored within two hundred forty (240) hours using
a Transponder Spare or unused transponder per the underlying lease agreement
between Microspace and Hughes as excerpted below:
"B. Provision of Continuing Service. In the event of a
-------------------------------
Transponder Capacity Failure, Hughes shall provide Customers
Transponder Capacity using a spare component(s) of a Transponder on
the Leased Satellite (including a spare traveling wave tube(s)), if
available, or if such spare component(s) is unavailable, then by using
an alternate Transponder(s) on the Leased Satellite, if available. The
availability of such spare component(s) or alternate Transponder(s) on
the Leased Satellite, on a permanent or temporary basis, shall be
determined by Hughes in its sole discretion. The foregoing
notwithstanding, Customer's sole remedies for any preemption or
interruption of use under this Article III, shall be the recovery of
an Outage Allowance pursuant to Article V, if applicable, or the
termination of this Agreement pursuant to Article VIII."
If it is not so restored, Customer may terminate this Agreement
immediately and without any notice to Microspace. In the event that the
Satellite is prematurely removed from service by Hughes and if Microspace has,
pursuant to the Hughes lease, preferential rights to replacement transponder
capacity on a successor satellite, Customer shall have the corresponding right
to sublease transponder service from Microspace on such successor satellite.
ARTICLE VII
TRACKING, TELEMETRY AND CONTROL
-------------------------------
7.01 Throughout the term of this Agreement, Hughes shall be responsible for
all the functions of Tracking, Telemetry and Control ("TT&C") including, without
limitation, stationkeeping, attitude control, and other satellite maintenance
and switching functions.
Page 6
<PAGE>
ARTICLE VIII
REPORTS AND COMMUNICATIONS
--------------------------
Microspace shall provide Customer with the following reports regarding the
operation of the satellite and the associated TT&C facilities:
8.01 Anomalous Operation Notification. Microspace shall notify Customer
--------------------------------
as soon as possible by telephone with prompt written confirmation of any
significant incidents that have been brought to its attention by Hughes which
have a material effect on Microspace's Transponder. Microspace also shall notify
Customer promptly of any circumstances that are brought to its attention which
make it clearly ascertainable or predictable that any of the incidents described
in this section will occur.
8.02 Maneuver Notification. Microspace shall notify Customer of all
---------------------
non-emergency maneuvers of The Satellite which would result in a change in the
orbital location of The Satellite within two (2) days of receiving notification
of the same from Hughes.
ARTICLE IX
USE OF TRANSPONDERS
-------------------
9.01 Use of and Right to Transponder. Customer shall have the right
-------------------------------
to use the Service, including transponder channels, provided hereunder for any
lawful purpose.
ARTICLE X
TERMINATION
-----------
10.01 Termination by Customer. Anything set forth herein to the
-----------------------
contrary notwithstanding, upon the occurrence of any of the following events
Customer may terminate this Agreement within ninety (90) days of actual
knowledge of the events giving rise to the right to termination:
(a) Breach or Default. If Microspace commits a material breach or
-----------------
default of any of the provisions of this Agreement and such breach or default
has not been cured within thirty (30) days after receipt by Microspace of
Customer's notice of such breach or default;
(b) Governmental Restrictions. If the performance of this Agreement
-------------------------
pursuant to the terms hereof has been prohibited by any federal, state or local
court, governmental or regulatory body, and Service has been interrupted for a
period of two hundred forty (240) hours or more as a result.
Page 7
<PAGE>
10.02 Termination by Microspace with Notice. Anything set forth herein to
-------------------------------------
the contrary notwithstanding, upon the occurrence of any of the following events
Microspace may terminate this Agreement upon ten (10) days prior notice of
intent to terminate to Customer:
(a) Breach or Default. If Customer commits a material breach or
-----------------
default of any of the provisions of this Agreement, including, but not limited
to a failure to pay timely the monthly charge due under Article IV, and such
breach or default has not been cured within thirty (30) days after receipt by
Customer of Microspace's notice of such breach or default;
(b) Governmental Restrictions. If performance of this Agreement
-------------------------
pursuant to the terms hereof has been prohibited by any federal, state or local
court, governmental or regulatory body, and performance by Customer has been
interrupted for a period of two hundred forty (240) hours or more as a result.
10.03 Termination by Microspace Without Notice. Microspace can
----------------------------------------
terminate this Agreement immediately if the underlying transponder lease between
Microspace and Hughes (the Hughes lease) terminates for reasons beyond the
control of Microspace. Termination of the Hughes lease shall not be deemed to
be beyond the control of Microspace if it results from a default of said lease
by Microspace and said default has been acknowledged as such in writing by
Microspace or judicially determined to be such.
10.04 Damages. A termination of this Agreement under Sections
-------
10.01(a) and 10.02(a) shall not limit a Party's right or ability to recover
damages occasioned to such Party as a result of the other Party's breach of this
Agreement.
ARTICLE XI
DEPOSIT
-------
11.01 Deposit. No deposit required.
-------
ARTICLE XII
INDEMNIFICATION AND LIMITATION OF LIABILITY
-------------------------------------------
12.01 Limitation of Liability.
-----------------------
(a) Neither Party shall not be liable for any failure of performance
hereunder due to causes beyond its control, including but not limited to acts of
God; fire, flood or other catastrophes; any law, order, regulation, direction,
action or request of the United States
Page 8
<PAGE>
government, or of any other government, including state and local governments
having jurisdiction over such Party, or of any department, agency, commission,
bureau, corporation or other instrumentality of any one or more said
governments, or of any civil or military authority, national emergencies,
insurrections; riots, wars, or strikes, lockouts, work stoppages or other labor
difficulties;
(b) Except with respect to an intentional breach by Microspace of
Section 2.02 or Section 13.15, the liability of Microspace for damages or losses
of any kind arising out of its furnishing Service to the Customer hereunder
shall not include consequential damages, as defined in Section 2.02 above;
(c) Microspace shall not be liable for any act or omission of any
other entity furnishing to the Customer facilities or equipment used with the
Service nor shall Microspace be liable for any damages or losses due to the
fault or negligence of the Customer or to the failure of Customer-provided
equipment or facilities.
12.02 Indemnification by Customer. Customer shall indemnify and hold
---------------------------
Microspace and its affiliates, its and their officers, employees or agents, or
any of them, whether acting through Microspace or otherwise, harmless from and
against:
(a) Use by Customer. All loss, liability, damage and expense,
---------------
including reasonable counsel fees due to claims for libel, slander, infringement
of copyright arising from the material transmitted by Customer over Microspace's
facilities; and any other claim resulting from any negligent or wrongful act or
omission of Customer or patrons of Customer and relating to the Service
furnished by Microspace;
(b) Misrepresentation, Breach, etc. Any and all damages occasioned
------------------------------
by, arising out of or resulting from any material misrepresentation, intentional
breach of warranty or covenant, or intentional default or intentional
nonfulfillment of any agreement on the part of Customer under this Agreement or
under any certificate, agreement, exhibit, schedule or other instrument
furnished to Microspace pursuant to this Agreement or in connection with any of
the transactions contemplated hereby;
(c) Defense of Third Party Claims. Microspace shall notify Customer
-----------------------------
within ten (10) days of its being served with a lawsuit, and otherwise within
thirty (30) days of its actual knowledge of the occurrence of any event, or of
its discovery of any facts, which in its opinion entitle or may entitle it to
indemnification from a third party claim under this Article. Microspace's
failure to do so shall preclude it from seeking indemnification hereunder unless
such failure has not prejudiced the Customer's ability to defend such claim.
Customer shall promptly defend such claim by counsel of its own choosing at its
own
Page 9
<PAGE>
cost and expense and Microspace shall cooperate with Customer in the defense of
such claim including the settlement of the matter on the basis stipulated by
Customer (with Customer being responsible for all costs and expenses of such
settlement). If Customer within reasonable time after notice of a claim fails to
defend Microspace, Microspace shall be entitled to undertake the defense,
compromise or settlement of such claim at the expense of and for the account and
risk of Customer;
(d) Right to Defend. If there is a reasonable probability that
---------------
resolution of a claim in the manner provided in paragraph (c) above will
materially and adversely affect Microspace, Microspace shall have the right, at
its own cost and expense, to defend, compromise or settle such claim against it;
(e) Claim Against Third Party. If the facts giving rise to
-------------------------
indemnification hereunder shall involve a possible claim by Microspace against a
third party, Microspace shall have the right, at its own costs and expense, to
undertake the prosecution, compromise and settlement of such claim;
(f) Release. Customer shall not, without Microspace's consent,
-------
settle or compromise any claim or consent to any entry of judgment which does
not include as a term thereof an unconditional release by the claimant or
plaintiff of Microspace from all liability with respect to such claim.
ARTICLE XIII
MISCELLANEOUS
-------------
13.01 Public Notice, Confidentiality and Proprietary Information.
----------------------------------------------------------
Notwithstanding any termination of this Agreement, Microspace and Customer shall
hold in confidence the information contained in this Agreement, and Microspace
and Customer hereby acknowledge that all information related to this Agreement
is confidential and proprietary and is not to be disclosed to third persons,
without the prior consent of both Microspace and Customer. Neither Microspace
nor Customer shall disclose to any third party (other than Hughes) the existence
of, or any of the terms and provisions of, this Agreement except as provided in
this Section 13.01. Neither Party shall issue a public notice or a news release
concerning this Agreement and the transactions contemplated hereby without the
prior approval of the other Party, which approval shall include the right to
approve the form, content and timing of any such release. To the extent that
either Party discloses additional information which it considers proprietary, it
shall identify such information as proprietary when disclosing it to the other
Party by marking it clearly and conspicuously as proprietary information;
provided, however, that Microspace understands and agrees that the names and
locations of Customer's patrons and affiliates are
Page 10
<PAGE>
confidential and proprietary and need not be identified as such at the time of
disclosure to Microspace. Any proprietary disclosure to either Party, if made
orally, shall be promptly confirmed in writing and identified as proprietary
information, if the disclosing Party wishes to keep such information proprietary
under this Agreement. Any such information disclosed under this Agreement shall
be used by the recipient thereof only in its performance under this Agreement.
Notwithstanding the foregoing, neither Party shall be liable for disclosure or
use of such proprietary information (but shall notify the other Party prior to
such disclosure or use) which is:
(a) Applicable Law. Required to be disclosed to the extent necessary
--------------
to comply with law or the valid order of a governmental agency or court of
competent jurisdiction;
(b) Internal Business Matter. Disclosed as part of its normal
------------------------
procedures to its officers, directors, parent company, auditors and attorneys,
each of whom shall agree to be bound by the provisions and spirit of this
Section;
(c) Enforcement of Rights. Disclosed in order to enforce its rights
---------------------
and perform its obligations pursuant to this Agreement;
(d) Financing and Disposition. Disclosed to the extent necessary as
-------------------------
part of a sale, lease or financing arrangement, to its purchasers, lessees,
investment bankers, independent auditors or legal counsel and their agents,
representatives or independent contractors or any financial institution;
provided, however, that such parties shall agree in writing to be bound by the
provisions and spirit of this Section;
(e) Public Information. Available or becomes available to the public
------------------
from a source other than the receiving Party before or during the period of this
Agreement, is lawfully obtained by the receiving Party from a third party or
parties, or is known by the receiving Party prior to such disclosure;
(f) Release. Released without restrictions in writing by the
-------
disclosing Party; or
(g) Independent Development. At any time developed by the receiving
-----------------------
Party completely independently of and prior to any such disclosure or
disclosures from the disclosing Party when such development can be documented to
have occurred prior to a disclosure. No license to the other Party, under any
patents, is granted or implied by conveying proprietary information or other
information to that Party.
Notwithstanding the foregoing, the existence (but not the material
terms) of this Agreement may be disclosed to the patrons and
Page 11
<PAGE>
affiliates of Customer to the extent necessary to establish proper transmission
of music and other communications services to such individuals and entities
through the leased transponder channels.
13.02 Not Fiduciaries. Nothing contained in this Agreement shall be
---------------
deemed or construed by the Parties hereto or by any third party to create any
rights, obligations or interests in third parties; to create the relationship of
principal and agent, partnership or joint venture or of any other fiduciary
relationship or association between the Parties.
13.03 Waiver. No failure on the part of either Party to notify the
------
other Party of any noncompliance hereunder, and no failure on the part of either
Party to exercise its rights hereunder shall prejudice any remedy for any
subsequent noncompliance, and any waiver by either Party of any breach or
noncompliance with any term or condition of this Agreement shall be limited to
the particular instance and shall not operate or be deemed to waive any future
breaches or noncompliance with any term or condition. All remedies and rights
hereunder and those available in law or in equity shall be cumulative and the
exercise by a Party of any such right or remedy shall not preclude the exercise
of any other right or remedy available under this Agreement in law or in equity.
13.04 Assignment and Binding Effect. This Agreement may be assigned
-----------------------------
by either Party to a third party during the term of this Agreement without the
written consent of the other Party.
13.05 Taxes. Customer shall not be responsible for any taxes and
-----
similar liabilities, including sales, use, income and personal property taxes,
which may be required under any federal, state or local laws with respect to the
Transponders used by Customer hereunder.
13.06 Expenses. Except as otherwise provided herein, each Party
--------
hereto shall bear its own expenses incurred in connection with the transactions
pursuant to this Agreement.
13.07 Construction. This Agreement shall be construed and enforced
------------
in accordance with the internal substantive laws of the State of North Carolina
except for conflicts of laws. The Parties hereby consent and submit to the
jurisdiction of the federal and state courts located in the State of North
Carolina, and any action or suit under this Agreement may be brought by the
Parties in any federal or state court with appropriate jurisdiction over the
subject matter established or sitting in the State of North Carolina. The
Parties shall not raise in connection therewith, and hereby waive, any defenses
based upon the venue, the inconvenience of the forum, the lack of personal
jurisdiction, the sufficiency of Service of process or the like in any such
action or suit brought in the State of North Carolina. If any action or
proceeding is brought for the enforcement of this Agreement, the successful or
Page 12
<PAGE>
prevailing party or parties shall be entitled to recover reasonable attorney's
fees and other costs incurred in the action or proceeding, in addition to any
other relief to which it or they may be entitled.
13.08 Notices. All necessary notices, demands, reports, orders and
-------
requests required or permitted hereunder shall be deemed to be duly given only
if and on the date sent by Federal Express, Express Mail, or other means of
overnight courier services requiring a signature upon delivery, mailed by
certified or registered United States mail, postage prepaid, return receipt
requested, or delivered by hand and addressed as follows:
(a) If to be given to Microspace:
Mr. Keith N. Smith
Microspace Communications Corporation
3100 Highwoods Boulevard
Raleigh, NC 27604
and
Mr. James F. Goodmon
Capitol Broadcasting Company
711 Hillsborough Street
Box 12800
Raleigh, NC 27605
(b) If to be given to Customer:
Mr. Thomas J. Gentry
Muzak DBS Division
3100 Highwoods Boulevard
Raleigh, NC 27604
and
Mr. John R. Jester
Muzak Limited Partnership
400 North 34th Street, Suite 200
Seattle, WA 98103
or to such other addresses as the Parties may specify in writing.
13.09 Headings. The headings of the Articles, Sections, Paragraphs and
--------
Subparagraphs of this Agreement are inserted as a matter of convenience and for
reference purposes only, are of no binding effect, and in no respect define,
limit or describe the scope of this Agreement or the intent of any provision
hereof.
Page 13
<PAGE>
13.10 Exhibits. All Exhibits attached to this Agreement shall be deemed
--------
part of this Agreement and incorporated herein as if fully set forth herein, and
in the event of a variation or an inconsistency between this Agreement and the
Exhibits attached hereto, the Agreement shall govern.
13.11 Ambiguities. This Agreement and the Exhibits hereto have been drafted
-----------
jointly by the Parties and in the event of any ambiguities in the language
hereof, there shall be no inference drawn in favor of either Party.
13.12 Entire Agreement. This Agreement, including the "WHEREAS" clauses on
----------------
Page 1, and all Exhibits hereto, represent the entire understanding and
agreement between the Parties hereto with respect to the subject matter hereof,
supersede all prior negotiations between such Parties, and can be amended,
supplemented or changed only by an agreement in writing which makes specific
reference to this Agreement and which is signed by both Parties.
13.13 Counterparts. This Agreement may be signed in counterpart and in
------------
multiple copies, and each such copy having all signatures attached thereto shall
constitute an original hereof.
13.14 Technical Support. During the term of this Agreement, Microspace
-----------------
will provide technical and operational support to Customer with respect to
transmission frequency planning and equipment modulation configuration, transmit
channel additions, software interface requirements and headend equipment
interface standards.
13.15 Hughes Communications Lease. Microspace hereby affirms and agrees
---------------------------
that it will use its best efforts properly to perform its obligations and
exercise its rights under the Hughes lease for the benefit of Customer as well
as itself and that, as afforded by the Hughes lease, in the event of its default
under such lease, Customer shall have the right (contingent on approval by
Hughes) to assume Microspace's rights and obligations under said lease to the
extent necessary to provide continued access to the transponder channels leased
by Customer under this Agreement. In the event of default, Microspace will use
its reasonable best efforts to seek Hughes' consent to assignment of the
transponder lease to Customer. Unless Microspace's breach of this Section 13.15
is intentional, Microspace will not be liable to Customer for consequential
damages, as defined in Section 2.02, for such breach. For purposes of this
provision, Microspace shall be deemed to be in default of the Hughes lease if
such default is acknowledged by it in writing or is judicially determined.
13.16 Representations and Warranties. Microspace represents and warrants
------------------------------
that, as of the date hereof, its lease with Hughes is a valid and binding lease
of the Transponder channels that are the subject of
Page 14
<PAGE>
this Agreement, it has performed its obligations and is in good standing under
the Hughes lease, and it knows of no breach or default by Hughes of the Hughes
lease. Each of the Parties hereto further represents and warrants to the other
that, as of the date hereof, (i) it has all necessary rights and powers to enter
into and fully perform this Agreement, (ii) this Agreement constitutes a valid
and binding obligation of such Party, (iii) it has no knowledge of any agreement
or arrangement which conflict with this Agreement or which limit or could
reasonably be expected to limit the performance of its obligations under this
Agreement, and (iv) it is in full compliance with all local, state, and federal
laws, rules, and regulations applicable to its performance of this Agreement. In
the event of a material breach of the foregoing representation and warranties,
Customer (if the breaching Party) shall indemnify and hold harmless Microspace
and its affiliates, its and their officers, employees or agents, or any of them,
as provided in Section 12.02, and Microspace (if the breaching Party) shall
indemnify and hold harmless Customer and its affiliates, its and their officers,
employees or agents, or any of them, from and against any and all damages
occasioned by, arising out of or resulting from such breach.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
MICROSPACE COMMUNICATIONS CORPORATION
By:/s/ Keith N. Smith
---------------------------------------
Keith N. Smith
Vice President and General Manager
Attest:[SIGNATURE ILLEGIBLE]
-----------------------------------
MUZAK LIMITED PARTNERSHIP
By:/s/ Thomas J. Gentry
---------------------------------------
Thomas J. Gentry
Vice President and General Manager
Attest: /s/ Susan A. Keith
----------------------------------
Page 15
<PAGE>
Exhibit 10.24
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been
separately filed with the Commission.
TRANSPONDER LEASE AGREEMENT
---------------------------
THIS AGREEMENT, made and entered into this 27th day of April, 1995, by
------
and between Microspace Communications Corporation, a North Carolina corporation
("Microspace") and Muzak Limited Partnership, a limited partnership with
principal offices in Seattle, Washington ("Customer").
WITNESSETH:
WHEREAS, Microspace has leased Ku-band transponder capacity from GTE
Spacenet Satellite Services Corporation ("GTE"); and
WHEREAS, Customer desires to use part of the transponder capacity leased by
Microspace for the purpose of SCPC transmission; and
WHEREAS, Microspace desires to provide such Service to Customer pursuant to
the terms and conditions hereof:
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein made, the Parties, intending to be legally bound, hereby
mutually agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
meanings:
1.01 "Agreement" means this Agreement.
1.02 "GSTAR IV" means the domestic communications satellite designed to
operate in the Ku-band, positioned at the 105 degrees W.L. orbital position.
1.03 "Microspace's Transponder" means that portion of a transponder or
transponders on GSTAR IV leased from GTE by Microspace.
1.04 "Parties" means the signatories to this Agreement and a "Party" means
one of such signatories.
1.05 "Transponder" or "Transponders" means Microspace's Transponder.
1.06 "Transponder Failure" means with respect to Microspace's Transponder,
any of the events as described in Paragraph 5.02.
1.07 "Transponder Performance Specifications" means those specifications
for the design and performance of the GSTAR IV Transponders contained in Exhibit
A.
1.08 "Spare Components" means certain redundant transponder equipment
units which are designed as substitutes for equipment component
1
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units, the failure of which could cause a transponder to fail to meet the
Transponder Performance Specifications.
1.09 "Service" means the Transponder Capacity leased by Customer from
Microspace.
ARTICLE II
SERVICE
-------
2.01 Beginning March 1, 1994, Customer shall take full-time Service from
Microspace as specified in Exhibit B, "Technical Specifications", "Individual
Subcarrier Specifications". During the term of this Agreement, Microspace shall
provide transponder capacity to Customer, subject and according to the terms
hereof, on a full-time (24 hours a day, 7 days a week) basis.
2.02 Orbital Location. Customer's Transponder Capacity shall be provided
----------------
on GTE's GSTAR IV satellite from the 105 degrees W. L. orbital location, except
as provided in Paragraph 12.02 below.
2.03 Uplink Facilities. Microspace shall provide transmitting equipment
-----------------
and related facilities (hereinafter "Uplink Facilities") sufficient to transmit
Customer's Signals from the ground to Microspace's Transponder subject to the
following conditions:
(a) The Uplink Facilities shall be located in or near Raleigh, North
Carolina;
(b) Microspace will provide, operate and maintain transmitting
equipment which will be capable of sending Customer's Signal to Microspace's
Transponder if Customer's Signal is configured so that it is technically
compatible with the transmitting equipment provided by Microspace;
(c) Microspace will operate the Uplink Facilities in a reasonable
manner consistent with the type of equipment located thereon. Unless Microspace
commits an intentional breach, it will not be liable for consequential damages
for breach of this provision. As used herein, "consequential damages" includes
revenues lost to Customer as a result of the inability of Customer to transmit
Customer's Signal but does not mean the costs incurred by Customer in replacing
damaged property or in securing replacement facilities or replacement
transponder capacity;
(d) Customer will adhere to all reasonable rules and regulations
established by Microspace for the Uplink Facilities, including, but not limited
to, access by third persons;
(e) The Uplink Facilities provided by Microspace shall include
facilities to allow for the downlink of Customer's Signal from other satellites,
2
<PAGE>
including those operating in C-band, for re-transmission to Microspace's
Transponder;
(f) Microspace will provide Customer space within a building at the
Uplink Facilities sufficient to accommodate standard Wegener or equivalent
modulation equipment required for transmission of Customer's channels as defined
in the Exhibits of this Agreement. Customer will pay no rent for said space.
Additional rack space will be leased to Customer, if requested, at rates to be
agreed upon, subject to space available:
(i) All taxes or assessments which are incurred as the result of
the installation and operation of Customer's equipment will be paid by Customer
in a timely manner;
(ii) Microspace will provide electric power and temporary
emergency backup electrical power for the operation of Customer's equipment
without charge. Microspace will use all reasonable efforts to maintain a
suitable environment within the building to support the operation of standard
electrical devices typically installed in Uplink Facilities;
(iii) Microspace will not be responsible for damage to or
destruction of Customer's equipment located at the Uplink Facilities unless the
damage or destruction is caused by Microspace's gross negligence or willful
misconduct.
ARTICLE III
TERM
----
3.01 Customer shall begin taking Service as provided herein for a term
commencing March 1, 1994 and continuing until the "Expiration Date," meaning the
earliest to occur of:
(a) February 28, 1999; or
(b) The termination or cancellation of this Agreement as
provided in Article X of this Agreement.
ARTICLE IV
----------
SERVICE PERFORMANCE; CREDITS
----------------------------
4.01 Microspace will provide Service on the Serving Transponder that meets
the Minimum Performance Standards set forth in Exhibit(s) A and B as measured on
equipment meeting all technical requirements of the FCC or other government
agency for satellite earth stations. For any period during which a Serving
Transponder fails to meet the Minimum Performance Standards set forth in
Exhibit(s) B and during which time Customer ceases to use the Service on that
Transponder (such period is a "Service Interruption"), Microspace will
3
<PAGE>
give Customer a credit allowance as described below. Failure of a Serving
Transponder to meet the Minimum Performance Standards does not constitute a
Service Interruption when due to any of the following causes:
(a) The failure or non-performance of any Customer-provided earth
stations, facilities or equipment;
(b) The fault, negligent act, or failure to act of Customer, its
employees, or agents;
(c) Sun outages, rain fade, or externally caused interference, other
than interference caused by GTE, or by its other customers, in
their use of GTE Satellite facilities;
(d) Suspensions or terminations of Service made in accordance with
this Agreement.
4.02 The duration of a Service Interruption is measured from the earlier
of the time that Microspace is Notified by Customer of a suspected Service
Interruption or Microspace otherwise becomes aware of a Service Interruption,
until the time the affected Serving Transponder again meets the Minimum
Performance Standards, or until the Service is otherwise restored on a
Transponder Meeting Minimum Performance Standards. Customer shall give
Microspace notice of any Service Interruption as is reasonably possible, along
with all relevant facts of which Customer is aware concerning such Interruption.
Any such notice may be given to Microspace verbally pursuant to Paragraph 16.08,
"Notices".
4.03 Microspace will give Customer a credit allowance for every minute of
Service Interruption in excess of a cumulative total of five (5) minutes of
Service Interruption in any calendar month. Any credit allowance granted under
this Agreement will be determined by Microspace as follows:
CREDIT ALLOWANCE = T x (M/Q)
Where - "T" is the number of minutes for which credits are to be calculated
pursuant to this Agreement; and
"M" is the Service Charge applicable to the affected Service as provided in
Exhibit(s) B; and
"Q" is the number of minutes in a month. For the purpose of this
Agreement, Q = 43,200.
Credits will be provided within ninety (90) days of the event giving rise
to the right to such credit. If, after the expiration of this Agreement,
Customer has not utilized credits granted pursuant to this Section, and
subject to payment of all sums due Microspace under this Agreement and all
other agreements between Customer and Microspace, Microspace will refund to
Customer the balance of such credits.
4.04 Microspace will grant Customer a credit in accordance with Paragraph
4.03 above for the period of time when Customer's use of the
4
<PAGE>
Serving Transponder is interrupted due to Service Testing or Emergency Testing
as described in Paragraph 5.03.
ARTICLE V
SERVICE OUTAGE AND FAILURE
--------------------------
5.01 A "Service Outage" shall be deemed to have occurred if (i) one or
more Service Interruptions of one (1) minute or more in duration occur on the
affected Serving Transponder during any consecutive seven hundred twenty (720)
hour period, and (ii) the aggregate of all such Service Interruptions on the
affected Serving Transponder during such period exceeds one hundred twenty (120)
minutes.
5.02 Except as provided in Paragraph 5.03 below, a Serving Transponder
shall be deemed to have failed (a "Service Failure") if:
(a) GTE fails to restore the affected Serving Transponder to meet the
Minimum Performance Standards within 24 hours of the occurrence
of a Service Outage; or
(b) GTE determines that the affected Serving Transponder cannot be
restored to meet the Minimum Performance Standards within 24
hours of the occurrence of a Service Outage; or
(c) the affected Serving Transponder is restored to meet the Minimum
Performance Standards within 24 hours of the occurrence of a
Service Outage and during the 720 hour period following any such
restoration, the affected Serving Transponder again experiences a
Service Outage.
5.03 The following shall not constitute a Service Failure:
(a) Service Testing. Service Testing may be performed only after a
minimum of 24 hours prior notice to Customer and after reasonable
efforts to coordinate such testing with Customer to minimize
disruption of its use of the Service. Such testing shall be
limited to circumstances in which testing is necessary to
maintain or initiate new service on the Serving Satellite, to
properly coordinate with other satellite users or operators, or
to otherwise prudently manage the Satellite while minimizing
Service Testing to the greatest extent possible.
(b) Emergency Testing. Emergency Testing may be performed only for
the purpose of restoring, or determining the cause of, a failure
of a component or subsystem on the Serving Satellite, or in
response to an order of a court or the FCC, or to determine the
cause or source of interference.
5
<PAGE>
(c) A Service Interruption that would otherwise qualify as a Service
Failure but for the fact that such Service Interruption resulted
from a Force Majeure as defined in Article VII.
(d) A Control Outage as defined in Article VI.
ARTICLE VI
CONTROL OUTAGE
--------------
6.01 If a Service Interruption occurs due to loss of control of the
Serving Satellite and the Service is not restored within a period of less than
one hundred twenty (120) hours from the start of such Service Interruption, a
"Control Outage" shall be deemed to have occurred, and this Agreement may be
terminated in accordance with Article X, "Termination and Suspension". During
the period of such Service Interruption that Service is not available and until
any Control Outage is deemed to have occurred, Microspace's obligation to
provide Service and Customer's obligation to pay for Service not yet provided on
the affected Serving Transponder(s) shall be suspended. Microspace will provide
to Customer a credit allowance in accordance with Paragraph 4.03 for any
payments received by Microspace for Service that is not provided during such
suspension.
ARTICLE VII
FORCE MAJEURE
-------------
7.01 Except as provided in Paragraph 7.02 below, Microspace shall not be
liable for: (i) the unavailability of the Service; or (ii) Service
Interruptions (other than for the granting of credits pursuant to Article IV,
"Service Performance; Credits") resulting from causes beyond its commercially
reasonable control, including, but not in any way limited to, the order of a
court or other government agency, or by operation of any law or regulation. Each
such event shall constitute a Force Majeure.
7.02 In the event of:
(a) The unavailability of the Service due to an event of Force
Majeure; or
(b) The failure of a Transponder to meet the Minimum Performance
Standards that would otherwise qualify as a Service Failure but
for the fact that such failure resulted from a Force Majeure.
Microspace's obligation to provide Service and Customer's obligation
to pay for Service not yet provided on the affected Serving Transponder will be
suspended until (i) the Service is available or is restored; (ii) Microspace
offers to provide Service on the same Serving Satellite on a
6
<PAGE>
Transponder of the same Transponder Class meeting the Minimum Performance
Standards ("Alternative Service"); or (iii) five (5) days have elapsed,
whichever first occurs. If within such five (5) day period, the Service is
available or the affected Serving Transponder is restored to meet the Minimum
Performance Standards or Microspace offers Alternative Service, the Parties'
obligations with respect to the affected Serving Transponder under this
Agreement shall be reinstated for the remainder of the Term of this Agreement.
If, within such five (5) day period, the Service is not available, the affected
Serving Transponder is not restored to meet the Minimum Performance Standards,
or Microspace does not offer Alternative Service, the affected Service may be
terminated by either Party as provided in Article X, "Termination and
Suspension". Microspace will provide to Customer a Credit allowance in
accordance with Paragraph 4.03 for any payments received for Service by
Microspace that is not provided during such suspension.
7.03 For the purpose of this Article VII, an irreparable satellite
component failure shall not be deemed a Force Majeure, regardless of the cause
of such failure, if the failure is of a type and mode that would have been
correctable through the use of the Spare Components on the Serving Satellite as
such components existed at the time of launch of the Satellite.
ARTICLE VIII
SERVICE PROTECTION
------------------
8.01 The Service Protection level provided by Microspace is a Protected
Service.
(a) "Protected Service" means service that entitles Customer to
restoration (subject to payment of all sums due Microspace for
Service rendered) of the affected service within 24 hours of the
occurrence of a Service Failure through the use of the Serving
Satellite's available Spare Components, unassigned Transponders,
or Transponders used to provide Preemptible Service (but not
those Transponders specifically reserved for restoration of
service of a particular customer or customers) of the same
Transponder Class as the Transponder on which the Service Failure
has occurred for so long as there remain available Spare
Components, unassigned Transponder, or Transponders used to
provide Preemptible Service on the Serving Satellite. Protected
Service will not be preempted except as provided in Paragraph
12.03 below.
(b) Restoration is provided to customers taking Protected Service
(and those who have otherwise contracted for restoration of
service) on the basis that the customer who first requires
restoration shall be first restored utilizing the then-available
complement of Spare Components, unassigned Transponders or
Transponders used to provide Preemptible
7
<PAGE>
The information below marked by [**] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
Service of the same Transponder Class as the Transponder on which
the Service Failure has occurred. The number of available Spare
Components, unassigned Transponder, and Transponders used to
provide Preemptible Service may be insufficient to guarantee one-
for-one restoration for each customer entitled to restoration and
is subject to change as a result of Satellite equipment failure,
or in the case of unassigned Transponders and Transponders used
to provide Preemptible Service, prior assignment, reservation, or
sale to another customer, making such Transponders unavailable to
Customer for restoration. The decision to the particular means of
restoration shall be exclusively GTE'S, and both Microspace and
Customer must comply with their decision. Any customer taking
Protected Service or that has otherwise contracted for
restoration may be determined by GTE, in GTE's sole discretion,
to require restoration within the meaning of this Article VIII
and in accordance with Article V, "Service Outage and Failure"
ARTICLE IX
CHARGES AND PAYMENT
-------------------
9.01 Customer shall pay to Microspace monthly, in advance, the sum of
[**].
If the term should not commence on the first day of a month or end on
the last day of a month, the monthly charge for the fractional part of the month
shall be calculated at a daily rate of one-thirtieth of the monthly charge
specified in the above paragraph.
All payments shall be made to Microspace at its address as designated
in Paragraph 16.08 and shall be deemed to be made upon receipt thereof by
Microspace. Microspace shall assess a late payment charge of one and one-half
percent (1.5%) compounded monthly on payments received after the due date.
9.02 Deposit. No deposit is required.
-------
9.03 [**].
8
<PAGE>
ARTICLE X
TERMINATION AND SUSPENSION
--------------------------
10.01 Termination by Customer. Anything set forth herein to the contrary
notwithstanding, upon the occurrence of any of the following events Customer may
terminate this Agreement within ninety (90) days of actual knowledge of the
events giving rise to the right to termination:
(a) Breach or Default. If Microspace commits a material breach or
default of any of the provisions of this Agreement and such
breach or default has not been cured within thirty (30) days
after receipt by Microspace of Customer's notice of such breach
or default; provided, however, that Customer may terminate this
Agreement immediately in the event that a Transponder Failure is
not corrected within one hundred twenty (120) hours as provided
in Paragraph 7.02 above.
(b) Government Restrictions. If the performance of this Agreement
pursuant to the terms hereof has been prohibited by any federal,
state or local court, governmental or regulatory body, and
Service has been interrupted for a period of one hundred twenty
(120) hours or more as a result.
10.02 Termination by Microspace with Notice. Anything set forth herein to
the contrary notwithstanding, upon the occurrence of any of the following events
Microspace may terminate this Agreement upon ten (10) days prior notice of
intent to terminate to Customer:
(a) Breach or Default. If Customer commits a material breach or
default of any of the provisions of this Agreement, including,
but not limited to a failure to pay timely the monthly charge due
under Article IX, and such breach or default has not been cured
within thirty (30) days after receipt by Customer of Microspace's
notice of such breach or default;
(b) Governmental Restriction. If performance of this Agreement
pursuant to the terms hereof has been prohibited by an federal,
state or local court, governmental or regulatory body, and
performance by Customer has been interrupted for a period of one
hundred twenty (120) hours or more as a result.
10.03 Termination by Microspace without Notice. Microspace can terminate
this Agreement immediately if the underlying transponder lease between
Microspace and GTE terminates for reasons beyond the control of Microspace.
Termination of the GTE lease shall not be deemed to be beyond the control of
Microspace if it results from a default of said lease by Microspace and said
default has been acknowledged as such in writing by Microspace or judicially
determined to be such.
9
<PAGE>
10.04 Either Party may terminate this Agreement:
(a) on written notice to the other Party with respect to Service on
an affected Transponder in the event of: (a) a Service Failure on
a Transponder providing Protected Service which cannot be
restored by GTE in accordance with Article VIII; or (b) a Service
Interruption that would otherwise qualify as a Service Failure
but for the fact that such Service Interruption resulted from a
Force Majeure for which Alternative Service is not offered by
Microspace within the five-day period specified in Paragraph
7.02; or
(b) on written notice to the other Party with respect to a Serving
Satellite in the event of (a) a Control Outage as defined in
Article VI; or (b) retirement of the Serving Satellite in
accordance with the following:
(i) Fifty percent (50%) or more of the Transponders on the
Satellite have failed or are unusable for any reason; or
(ii) In the event that the Satellite's station-keeping fuel
becomes depleted to a level sufficient only to ensure
removal of the Satellite from its assigned orbital
position; or
(iii) If required to do so by any governmental authority; or
(iv) If special circumstances require retirement, and such FCC
authority as is required for retirement is obtained.
Microspace will use its best efforts to provide Customer
written notice of any final decision to retire the Serving
Satellite effective prior to the expiration of this
Agreement as far in advance of the date of retirement as
the circumstances allow. Upon retirement of the Serving
Satellite, all future performance obligations under this
Agreement hereunder shall terminate.
(c) in the event of a material breach by the other Party for which no
cure period is specified herein if such breach continues for a
period of thirty (30) days after notice of intention to terminate
is given by the non-breaching Party.
10.05 In addition to its rights under Paragraph 10.02 above, Microspace may
terminate this Agreement on written notice of:
(a) Customer's non-payment of sums due Microspace; or
(b) use of the Service in a manner which violates any applicable law,
rule, or regulation; or
10
<PAGE>
(c) if the event giving rise to the notice of termination is not
cured within five (5) days following the date of such notice.
10.06 In addition to its rights under Paragraph 10.01 above, Customer may
on written notice to Microspace terminate this Agreement within fifteen (15)
days of the date of receipt of notice from Microspace that the Serving Satellite
is to be relocated as provided in Paragraph 12.02 below if, as a result of such
relocation, the Serving Transponder will not meet the Minimum Performance
Standards.
10.07 In the event this Agreement is terminated by either Party, Customer
shall cease using the Service provided pursuant to this Agreement and shall pay
(i) all charges and/or fees due Microspace (including late payment charges) up
to the date of termination; plus (ii) any sums due Microspace pursuant to
Article IX and Article XI; less (iii) any payments made to Microspace by
Customer for Service not yet provided, including any remaining Security Deposit
or Advance Payment which has not otherwise been applied by Microspace to payment
of sums due Microspace, or any unused credit allowances due Customer, whereupon
all future performance obligations under this Agreement of the Parties hereunder
shall terminate.
10.08 Damages. A termination of this Agreement under Sections 10.01(a) and
-------
10.02(a) shall not limit a Party's right or ability to recover damages
occasioned to such Party as a result of the other Party's breach of this
Agreement.
ARTICLE XI
INDEMNIFICATION AND LIMITATION OF LIABILITY
-------------------------------------------
11.01 Limitation of Liability.
-----------------------
(a) Neither Party shall be liable for any failure of performance
hereunder due to causes beyond its control, including but not limited to acts
of God; fire, flood or other catastrophes; any law, order, regulation,
direction, action or request of the United States government, or of any other
government, including state and local governments having jurisdiction over
such Party, or of any department, agency, commission, bureau, corporation or
other instrumentality of any one or more said governments, or of any civil or
military authority, national emergencies, insurrections; riots, wars, or
strikes, lockouts, work stoppages or other labor difficulties;
(b) Except with respect to an intentional breach by Microspace of
Section 2.02, the liability of Microspace for damages or losses of any kind
arising out of its furnishing Service to the Customer hereunder shall not
include consequential damages, as defined in Section 2.02 above;
11
<PAGE>
(c) Microspace shall not be liable for any act or omission of any
other entity furnishing to the Customer facilities or equipment used with the
Service nor shall Microspace be liable for any damages or losses due to the
fault or negligence of the Customer or to the failure of Customer-provided
equipment or facilities.
11.02 Indemnification by Customer. Customer shall indemnify and hold
---------------------------
Microspace and its affiliates, its and their officers, employees or agents, or
any of them, whether acting through Microspace or otherwise, harmless from and
against:
(a) Use by Customer. All loss, liability, damage and expense,
---------------
including reasonable counsel fees due to claims for libel, slander,
infringement of copyright arising from the material transmitted by Customer
over Microspace's facilities; and any other claim resulting from any negligent
or wrongful act or omission of Customer or patrons of Customer and relating to
the Service furnished by Microspace;
(b) Misrepresentation, Breach, etc. Any and all damages occasioned
-------------------------------
by, arising out of or resulting from any material misrepresentation,
intentional breach of warranty or covenant, or intentional default or
intentional nonfulfillment of any agreement on the part of Customer under this
Agreement or under any certificate, agreement, exhibit, schedule or other
instrument furnished to Microspace pursuant to this Agreement or in connection
with any of the transactions contemplated hereby;
(c) Defense of Third Party Claims. Microspace shall notify Customer
-----------------------------
within ten (10) days of its being served with a lawsuit, and otherwise within
thirty (30) days of its actual knowledge of the occurrence of any event, or of
its discovery of any facts, which in its opinion entitle or may entitle it to
indemnification from a third party claim under this Article. Microspace's
failure to do so shall preclude it from seeking indemnification hereunder
unless such failure has not prejudiced the Customer's ability to defend such
claim. Customer shall promptly defend such claim by counsel of its own
choosing at its own cost and expense and Microspace shall cooperate with
Customer in the defense of such claim including the settlement of the matter
on the basis stipulated by Customer (with Customer being responsible for all
costs and expenses of such settlement). If Customer within reasonable time
after notice of a claim fails to defend Microspace, Microspace shall be
entitled to undertake the defense, compromise or settlement of such claim at
the expense of and for the account and risk of Customer;
(d) Right to Defend. If there is a reasonable probability that
---------------
resolution of a claim in the manner provided in paragraph (c) above will
materially and adversely affect Microspace, Microspace shall have the
12
<PAGE>
right, at its own cost and expense, to defend, compromise or settle such claim
against it;
(e) Claim Against Third Party. If the facts giving rise to
-------------------------
indemnification hereunder shall involve a possible claim by Microspace against
a third party, Microspace shall have the right, at its own costs and expense,
to undertake the prosecution, compromise and settlement of such claim;
(f) Release. Customer shall not, without Microspace's consent,
-------
settle or compromise any claim or consent to any entry of judgment which does
not include as a term thereof an unconditional release by the claimant or
plaintiff of Microspace from all liability with respect to such claim.
ARTICLE XII
-----------
SATELLITE OPERATIONS
--------------------
12.01 Nothing in this Agreement shall be construed to prevent GTE from
taking any action necessary to protect its Satellite(s) or to implement its
obligations under Article VIII hereof on a non-discriminatory basis to all
Protected Service customers or those customers otherwise contracting for
restoration, or to act in accordance with the Operations Procedures.
12.02 GTE reserves the right to relocate the Serving Satellite in
accordance with applicable regulations of the FCC or other governmental agencies
having jurisdiction. Prior to any such relocation of the Serving Satellite, GTE
will give Microspace, and Microspace will give Customer, notice of the
Satellite's new location, a schedule for such relocation, and whether the
Serving Transponder(s) will continue to meet the Minimum Performance Standards.
Thereafter, unless this Agreement is Terminated in accordance with Article X,
the rights and obligations of the Parties under this Agreement shall continue.
During the period that Service is not available and until any relocation is
completed, GTE's obligation to provide Service shall be suspended, and
Microspace will provide to Customer a credit allowance in accordance with
Paragraph 4.03 for any payments received by Microspace for the Service that was
unavailable due to the relocation; provided, however, that if Alternative
Service is offered by Microspace and accepted by Customer for this period, a
credit allowance will not apply.
12.03 Customer acknowledges and agrees that it may be necessary in unusual
or abnormal situations or conditions for Microspace to deliberately interrupt
Customer's use of the Serving Transponder in order to protect the overall
performance of the Serving Satellite, which situations may include, without
limitation, telemetry indications of spacecraft system malfunctions during or
near periods of eclipse, indications of attitude control or maneuver
malfunctions, or power subsystem anomalies. Such decision shall be made by
Microspace in its sole discretion. To the extent technically feasible,
Microspace
13
<PAGE>
shall give Customer as much prior notice of such interruption as is practicable
and Microspace will use its best efforts to consult with Customer and to
schedule and conduct its activities during periods of such interruption so as to
minimize the disruption of Customer's use of the Serving Transponder. Customer
agrees that the interruption, for reasons stated in this paragraph, of
Customer's use of the Transponder on which Service is being provided shall not
be deemed a Service Failure, and Microspace's sole liability for any such
interruption shall be the issuance of credits as described in Article IV.
ARTICLE XIII
------------
SEVERABILITY
------------
13.01 In the event any one or more of the provisions of this Agreement
shall for any reason be held to be invalid or unenforceable, the remaining
provisions of this Agreement shall be unimpaired, and the invalid or
unenforceable provision shall be replaced by a provision which, being valid and
enforceable, accurately reflects the intention of the Parties underlying the
invalid or unenforceable provisions.
ARTICLE XIV
-----------
CLAIMS
------
14.01 The failure of either Party to insist upon strict adherence to any
provision of this Agreement on any occasion shall not be considered a waiver of
any right thereafter to insist upon strict adherence to that provision or any
other provision of this Agreement. Any and all claims arising under this
Agreement, except claims for non-payment of sums due, shall be brought within
one (1) year of the date that the circumstances giving rise to such claim first
occurred.
ARTICLE XV
----------
SURVIVAL
--------
15.01 Termination of this Agreement by either Party for whatever cause
shall not affect any provision of this Agreement which, by its nature, is
intended to survive or operate in the event of termination and shall not
prejudice or affect the rights of either Party against the other with respect to
any breach of this Agreement which may have been committed prior to the date of
any such termination. Subject only to the foregoing sentence, both Parties
shall in the event of any such termination be discharged from all of their
respective obligations under this Agreement which were due to have been
performed after the date of any such termination.
14
<PAGE>
ARTICLE XVI
MISCELLANEOUS
-------------
16.01 Public Notice, Confidentiality and Proprietary Information.
----------------------------------------------------------
Notwithstanding any termination of this Agreement, Microspace and Customer shall
hold in confidence the information contained in this Agreement, and Microspace
and Customer hereby acknowledge that all information related to this Agreement
is confidential and proprietary and is not to be disclosed to third persons,
without the prior consent of both Microspace and Customer. Neither Microspace
nor Customer shall disclose to any third party (other than GTE) the existence
of, or any of the terms and provisions of, this Agreement except as provided in
this Section 16.01. Neither Party shall issue a public notice or a news release
concerning this Agreement and the transactions contemplated hereby without the
prior approval of the other Party, which approval shall include the right to
approve the form, content and timing of any such release. To the extent that
either Party discloses additional information which it considers proprietary, it
shall identify such information as proprietary when disclosing it to the other
Party by marking it clearly and conspicuously as proprietary information;
provided, however, that Microspace understands and agrees that the names and
locations of Customer's patrons and affiliates are confidential and proprietary
and need not be identified as such at the time of disclosure to Microspace. Any
proprietary disclosure to either Party, if made orally, shall be promptly
confirmed in writing and identified as proprietary information, if the
disclosing Party wishes to keep such information proprietary under this
Agreement. Any such information disclosed under this Agreement shall be used by
the recipient thereof only in its performance under this Agreement.
Notwithstanding the foregoing, neither Party shall be liable for disclosure or
use of such proprietary information (but shall notify the other Party prior to
such disclosure or use) which is:
(a) Applicable Law. Required to be disclosed to the extent necessary
--------------
to comply with law or the valid order of a governmental agency or court of
competent jurisdiction;
(b) Internal Business Matter. Disclosed as part of its normal
------------------------
procedures to its officers, directors, parent company, auditors and attorneys,
each of whom shall agree to be bound by the provisions and spirit of this
Section;
(c) Enforcement of Rights. Disclosed in order to enforce its rights
---------------------
and perform its obligations pursuant to this Agreement;
(d) Financing and Disposition. Disclosed to the extent necessary as
-------------------------
part of a sale, lease or financing arrangement, to its purchasers, lessees,
investment bankers, independent auditors or legal
15
<PAGE>
counsel and their agents, representatives or independent contractors or any
financial institution; provided, however, that such parties shall agree in
writing to be bound by the provisions and spirit of this Section;
(e) Public Information. Available or becomes available to the public
------------------
from a source other than the receiving Party before or during the period of this
Agreement, is lawfully obtained by the receiving Party from a third party or
parties, or is known by the receiving Party prior to such disclosure;
(f) Release. Released without restrictions in writing by the
-------
disclosing Party; or
(g) Independent Development. At any time developed by the receiving
-----------------------
Party completely independently of and prior to any such disclosure or
disclosures from the disclosing Party when such development can be documented to
have occurred prior to a disclosure. No license to the other Party, under any
patents, is granted or implied by conveying proprietary information or other
information to that Party.
Notwithstanding the foregoing, the existence (but not the material
terms) of this Agreement may be disclosed to the patrons and affiliates of
Customer to the extent necessary to establish proper transmission of music and
other communications services to such individuals and entities through the
leased transponder channels.
16.02 Not Fiduciaries. Nothing contained in this Agreement shall be deemed
---------------
or construed by the Parties hereto or by any third party to create any rights,
obligations or interests in third parties; to create the relationship of
principal and agent, partnership or joint venture or of any other fiduciary
relationship or association between the Parties.
16.03 Waiver. No failure on the part of either Party to notify the other
------
Party of any noncompliance hereunder, and no failure on the part of either Party
to exercise its rights hereunder shall prejudice any remedy for any subsequent
noncompliance, and any waiver by either Party of any breach or noncompliance
with any term or condition of this Agreement shall be limited to the particular
instance and shall not operate or be deemed to waive any future breaches or
noncompliance with any term or condition. All remedies and rights hereunder and
those available in law or in equity shall be cumulative and the exercise by a
Party of any such right or remedy shall not preclude the exercise of any other
right or remedy available under this Agreement in law or in equity.
16.04 Assignment and Binding Effect. This Agreement may be assigned by
-----------------------------
either Party to a third party during the term of this Agreement without the
written consent of the other Party.
16
<PAGE>
16.05 Taxes. Customer shall not be responsible for any taxes and similar
-----
liabilities, including sales, use, income and personal property taxes, which may
be required under any federal, state or local laws with respect to the
Transponders used by Customer hereunder.
16.06 Expenses. Except as otherwise provided herein, each Party hereto
--------
shall bear its own expenses incurred in connection with the transactions
pursuant to this Agreement.
16.07 Construction. This Agreement shall be construed and enforced in
------------
accordance with the internal substantive laws of the State of North Carolina
except for conflicts of laws. The Parties hereby consent and submit to the
jurisdiction of the federal and state courts located in the State of North
Carolina, and any action or suit under this Agreement may be brought by the
Parties in any federal or state court with appropriate jurisdiction over the
subject matter established or sitting in the State of North Carolina. The
Parties shall not raise in connection therewith, and hereby waive, any defenses
based upon the venue, the inconvenience of the forum, the lack of personal
jurisdiction, the sufficiency of Service of process or the like in any such
action or suit brought in the State of North Carolina. If any action or
proceeding is brought for the enforcement of this Agreement, the successful or
prevailing party or parties shall be entitled to recover reasonable attorney's
fees and other costs incurred in the action or proceeding, in addition to any
other relief to which it or they may be entitled.
16.08 Notices. All necessary notices, demands, reports, orders and
-------
requests required or permitted hereunder shall be deemed to be duly given only
if and on the date sent by Federal Express, Express Mail, or other means of
overnight courier services requiring a signature upon delivery, mailed by
certified or registered United States mail, postage prepaid, return receipt
requested, or delivered by hand and addressed as follows:
(a) If to be given to Microspace:
Mr. Keith N. Smith
Microspace Communications Corporation
3100 Highwoods Boulevard
Raleigh, NC 27604
and
17
<PAGE>
Mr. James F. Goodmon
Capitol Broadcasting Company
711 Hillsborough Street
Box 12800
Raleigh, NC 27605
(b) If to be given to Customer:
Mr. Thomas J. Gentry
Muzak DBS Division
3100 Highwoods Boulevard
Raleigh, NC 27604
and
Mr. John R. Jester
Muzak Limited Partnership
400 North 34th Street, Suite 200
Seattle, WA 98103
or to such other addresses as the Parties may specify in writing.
16.09 Headings. The headings of the Articles, Sections, Paragraphs and
--------
Subparagraphs of this Agreement are inserted as a matter of convenience and for
reference purposes only, are of no binding effect, and in no respect define,
limit or describe the scope of this Agreement or the intent of any provision
hereof.
16.10 Exhibits. All Exhibits attached to this Agreement shall be deemed
--------
part of this Agreement and incorporated herein as if fully set forth herein, and
in the event of a variation or an inconsistency between this Agreement and the
Exhibits attached hereto, the Agreement shall govern.
16.11 Ambiguities. This Agreement and the Exhibits hereto have been
-----------
drafted jointly by the Parties and in the event of any ambiguities in the
language hereof, there shall be no inference drawn in favor of either Party.
16.12 Entire Agreement. This Agreement, including the "WHEREAS" clauses on
----------------
Page 1, and all Exhibits hereto, represent the entire understanding and
agreement between the Parties hereto with respect to the subject matter hereof,
supersede all prior negotiations between such Parties, and can be amended,
supplemented or changed only by an agreement in writing which makes specific
reference to this Agreement and which is signed by both Parties.
18
<PAGE>
16.13 Counterparts. This Agreement may be signed in counterpart and in
------------
multiple copies, and each such copy having all signatures attached thereto shall
constitute an original hereof.
16.14 Technical Support. During the term of this Agreement, Microspace
-----------------
will provide technical and operational support to Customer with respect to
transmission frequency planning and equipment modulation configuration, transmit
channel additions, software interface requirements and headend equipment
interface standards.
19
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
MICROSPACE COMMUNICATIONS CORPORATION
By: /s/ Keith N. Smith
---------------------------------------
Keith N. Smith
Vice President and General Manager
Attest [SIGNATURE ILLEGIBLE]
------------------------------------
MUZAK LIMITED PARTNERSHIP
By: /s/Thomas J. Gentry
---------------------------------------
Thomas J. Gentry
Vice President and General Manager
Attest /s/ Susan A. Keith
------------------------------------
20
<PAGE>
EXHIBIT 10.25
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been separately
filed with the Commission.
TRANSPONDER LEASE AGREEMENT
---------------------------
THIS AGREEMENT, made and entered into this 5th day of July, 1995, by
--- ----
and between Microspace Communications Corporation, a North Carolina corporation
("Microspace"), and Muzak Limited Partnership, a limited partnership with
principal offices in Seattle, Washington ("Customer").
WITNESSETH:
WHEREAS, Microspace has leased transponder capacity on the Galaxy IV Ku-
band domestic communications satellite operated by Hughes Communications Galaxy
Inc. (Hughes); and
WHEREAS, Customer desires to use part of the transponder capacity leased by
Microspace for the purpose of SCPC transmission; and
WHEREAS, Microspace desires to provide such Service to Customer pursuant to
the terms and conditions hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein made, the Parties, intending to be legally bound, hereby
mutually agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
meanings:
1.01 "Agreement" means this Agreement.
1.02 "Galaxy IV" means the domestic communications satellite designed to
operate in the Ku-band, positioned at the 99 degrees W.L. orbital position.
1.03 "Microspace's Transponder Capacity" means that portion of a
transponder or transponders on a 54 MHz transponder with downlink coverage of
Hawaii, Alaska, Continental United States and Puerto Rico on Galaxy IV leased
from Hughes by Microspace.
1.04 "Parties" means the signatories to this Agreement and a "Party" means
one of such signatories.
1.05 "Transponder" or "Transponders" means Microspace's Transponder.
Page 1
<PAGE>
1.06 "Transponder Failure" means with respect to Microspace's Transponder,
any of the following events:
(a) Twenty (20) or more "outage units" shall occur within any thirty
(30) consecutive days (an outage unit being an interruption of Microspace's
Transponder such that an Outage Allowance is due under Article V of this
Agreement);
(b) Microspace's Transponder shall fail to meet Transponder
Performance Specifications for twelve (12) consecutive days.
1.07 "Transponder Performance Specifications" means those specifications
for the design and performance of the Galaxy VII Transponders contained in
Exhibit A.
1.08 "Transponder Spares" means certain redundant transponder equipment
units which are designed as substitutes for equipment component units, the
failure of which could cause a transponder to fail to meet the Transponder
Performance Specifications.
1.09 "Customer's Signal" means the complete intelligence to be transmitted
to Microspace's Transponder on behalf of Customer pursuant to this Agreement.
1.10 "Service" means the Transponder Capacity leased by Customer from
Microspace.
ARTICLE II
SERVICE
-------
2.01 Transponder Service. Beginning August 15, 1995, Customer shall take
-------------------
full-time Service from Microspace as specified in Exhibit B, "Technical
Specifications", Part 1, "Individual Subcarrier Specifications". During the
term of this Agreement, Microspace shall provide transponder capacity to
Customer, subject and according to the terms hereof, on a full-time (24 hours a
day, 7 days a week) basis.
2.02 Orbital Location. Customer's Transponder Capacity shall be provided
----------------
from the 99 degrees W.L. orbital location.
2.03 Uplink Facilities. Microspace shall provide transmitting equipment
-----------------
and related facilities (hereinafter "Uplink Facilities") sufficient to transmit
Customer's Signals from the ground to Microspace's Transponder subject to the
following conditions:
Page 2
<PAGE>
(a) The Uplink Facilities shall be located in or near Raleigh, North
Carolina;
(b) Microspace will provide, operate and maintain transmitting
equipment which will be capable of sending Customer's Signal to Microspace's
Transponder if Customer's Signal is configured so that it is technically
compatible with the transmitting equipment provided by Microspace;
(c) Microspace will operate the Uplink Facilities in a reasonable
manner consistent with the type of equipment located thereon. Unless Microspace
commits an intentional breach, it will not be liable for consequential damages
for breach of this provision. As used herein, "consequential damages" includes
revenues lost to Customer as a result of the inability of Customer to transmit
Customer's Signal but does not mean the costs incurred by Customer in replacing
damaged property or in securing replacement facilities or replacement
transponder capacity;
(d) Customer will adhere to all reasonable rules and regulations
established by Microspace for the Uplink Facilities, including, but not limited
to, access by third persons;
(e) The Uplink Facilities provided by Microspace shall include
facilities to allow for the downlink of Customer's Signal from other satellites,
including those operating in C-band, for re-transmission to Microspace's
Transponder;
(f) Microspace will provide Customer space within a building at the
Uplink Facilities sufficient to accommodate standard Wegener or equivalent
modulation equipment required for transmission of Customer's channels as defined
in the Exhibits of this Agreement. Customer will pay no rent for said space.
Additional rack space will be leased to Customer, if requested, at rates to be
agreed upon, subject to space available:
(i) All taxes or assessments which are incurred as the result of
the installation and operation of Customer's equipment will be paid by Customer
in a timely manner;
(ii) Microspace will provide electric power and temporary
emergency backup electrical power for the operation of Customer's equipment
without charge. Microspace will use all reasonable efforts to maintain a
suitable environment within the building to support the operation of standard
electrical devices typically installed in Uplink Facilities;
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
(iii) Microspace will not be responsible for damage to or
destruction of Customer's equipment located at the Uplink Facilities unless the
damage or destruction is caused by Microspace's gross negligence or willful
misconduct.
ARTICLE III
SERVICE TERM
------------
3.01 Term. Customer shall begin taking Service as provided herein for a
----
term commencing August 15, 1995, and continuing until the Expiration Date, as
defined below:
"Expiration Date": Upon the earlier to occur:
(a) July 31, 2000; or
(b) The termination or cancellation of this Agreement as provided in
Article X of this Agreement.
ARTICLE IV
MONTHLY CHARGE AND METHOD OF PAYMENT
------------------------------------
4.01 Monthly Charge. Customer shall pay to Microspace monthly, in
--------------
advance, the sum of [**].
If the term should not commence on the first day of a month or end on
the last day of a month, the monthly charge for the fractional part of the month
shall be calculated at a daily rate of one-thirtieth of the monthly charge
specified in Paragraph 4.01.
All payments shall be made to Microspace at its address as designated
in Paragraph 13.08 and shall be deemed to be made upon receipt thereof by
Microspace. Microspace shall assess a late payment charge of one and one-half
percent (1.5%) compounded monthly on payments received after the due date.
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
4.02 [**].
ARTICLE V
INTERRUPTION OF TRANSMISSIONS OVER TRANSPONDERS
-----------------------------------------------
5.01 Outage Allowance. If applicable, Microspace shall grant Customer an
----------------
Outage Allowance, as follows:
If an "Outage Allowance Failure Period" (as defined below) occurs,
then for each full hour of such Outage Allowance Failure Period Microspace shall
grant Customer a pro rata Outage Allowance based upon the monthly charge for
Customer's Transponder Capacity and the length of the Outage Allowance Failure
Period, calculated pursuant to the equation below. Any such Outage Allowance
shall be applied to the next succeeding monthly billing to Customer and shall
not in any case exceed one month's standard billing. As used herein, "Outage
Allowance Failure Period" shall mean the aggregate period (in hours) -- only
where such aggregation exceeds twelve (12) hours during any consecutive thirty
(30) day period -- during which a Transponder Capacity Failure(s) occurs. For
purposes of this Agreement, A Transponder Capacity Failure shall be measured
from the time Microspace receives notice from Customer of the Transponder
Capacity Failure until the time the Transponder has been restored to operation,
but shall not begin in any event until Customer ceases to use Customer's
Transponder Capacity.
Outage Allowance = Outage Allowance Failure Period (In Hours) X Monthly Lease
Payment
----------------------------------------------------------
720 Hours/Month
In no case shall an Outage Allowance be made for any Transponder
Capacity Failure related to: (i) any failure on the part of Customer to perform
its transmission or other material or operational obligations pursuant to this
Agreement, (ii) failure of facilities provided by Customer, (iii) reasonable
periodic maintenance, (iv) interference from third party transmissions or usage,
(v) cooperative testing, except where trouble or fault is found in the
Transponder or (vi) any other act or failure to act by Customer.
<PAGE>
5.02 Resolution of Credit Disputes. In the event that Microspace and
-----------------------------
Customer cannot agree on the amount of credit due Customer following an
interruption, Customer may withhold payment of the disputed amount until
Microspace and Customer resolve the dispute; provided, however, that should a
credit dispute or disputes arise totalling two months Service fees or more in
the aggregate, Microspace or Customer may cancel this Agreement on thirty (30)
days written notice and pursue all legal remedies available to resolve the
dispute, including claims of breach for wrongful termination.
ARTICLE VI
TRANSPONDER PROTECTION
----------------------
6.01 Restoration of Service. If Microspace's Transponder suffers a
----------------------
Transponder Failure, Customer shall remain bound by this Agreement if
Microspace's Transponder is restored within two hundred forty (240) hours using
a Transponder Spare or unused transponder per the underlying lease agreement
between Microspace and Hughes as excerpted below:
"B. Provision of Continuing Service. In the event of a Transponder
-------------------------------
Capacity Failure, Hughes shall provide Customer's Transponder Capacity
using a spare component of a Transponder on the Satellite (including a
spare traveling wave tube, if available, or if such spare component is
unavailable, then by using an alternate Transponder on the Satellite, if
available. The availability of such spare component or alternate
Transponder on the Satellite, on a permanent or temporary basis, shall be
determined by Hughes in its sole discretion. The foregoing
notwithstanding, Customer's sole remedies for any preemption or
interruption of use under this Article III, shall be the recovery of an
Outage Allowance pursuant to Article V, or the termination of this
Agreement pursuant to Article VIII."
If it is not so restored, Customer may terminate this Agreement
immediately and without any notice to Microspace. In the event that the
Satellite is prematurely removed from service by Hughes and if Microspace has,
pursuant to the Hughes lease, preferential rights to replacement transponder
capacity on a successor satellite, Customer shall have the corresponding right
to sublease transponder service from Microspace on such successor satellite.
ARTICLE VII
TRACKING, TELEMETRY AND CONTROL
-------------------------------
7.01 Throughout the term of this Agreement, Hughes shall be responsible for
all the functions of Tracking, Telemetry and Control ("TT&C") including, without
limitation, stationkeeping, attitude control, and other satellite maintenance
and switching functions.
<PAGE>
ARTICLE VIII
REPORTS AND COMMUNICATIONS
--------------------------
Microspace shall provide Customer with the following reports regarding the
operation of the satellite and the associated TT&C facilities:
8.01 Anomalous Operation Notification. Microspace shall notify Customer as
--------------------------------
soon as possible by telephone with prompt written confirmation of any
significant incidents that have been brought to its attention by Hughes which
have a material effect on Microspace's Transponder. Microspace also shall notify
Customer promptly of any circumstances that are brought to its attention which
make it clearly ascertainable or predictable that any of the incidents described
in this section will occur.
8.02 Maneuver Notification. Microspace shall notify Customer of all non-
---------------------
emergency maneuvers of The Satellite which would result in a change in the
orbital location of The Satellite within two (2) days of receiving notification
of the same from Hughes.
ARTICLE IX
USE OF TRANSPONDERS
-------------------
9.01 Use of and Right to Transponders. Customer shall have the right to
--------------------------------
use the Service, including transponder channels, provided hereunder for any
lawful purpose.
ARTICLE X
TERMINATION
-----------
10.01 Termination by Customer. Anything set forth herein to the contrary
-----------------------
notwithstanding, upon the occurrence of any of the following events Customer may
terminate this Agreement within ninety (90) days of actual knowledge of the
events giving rise to the right to termination:
(a) Breach or Default. If Microspace commits a material breach or
-----------------
default of any of the provisions of this Agreement and such breach or default
has not been cured within thirty (30) days after receipt by Microspace of
Customer's notice of such breach or default;
(b) Governmental Restrictions. If the performance of this Agreement
-------------------------
pursuant to the terms hereof has been prohibited by any federal, state or local
court, governmental or regulatory body, and Service has been interrupted for a
period of two hundred forty (240) hours or more as a result.
<PAGE>
10.02 Termination by Microspace with Notice. Anything set forth herein to
-------------------------------------
the contrary notwithstanding, upon the occurrence of any of the following events
Microspace may terminate this Agreement upon ten (10) days prior notice of
intent to terminate to Customer:
(a) Breach or Default. If Customer commits a material breach or
-----------------
default of any of the provisions of this Agreement, including, but not limited
to a failure to pay timely the monthly charge due under Article IV, and such
breach or default has not been cured within thirty (30) days after receipt by
Customer of Microspace's notice of such breach or default;
(b) Governmental Restrictions. If performance of this Agreement
-------------------------
pursuant to the terms hereof has been prohibited by any federal, state or local
court, governmental or regulatory body, and performance by Customer has been
interrupted for a period of two hundred forty (240) hours or more as a result.
10.03 Termination by Microspace Without Notice. Microspace can terminate
----------------------------------------
this Agreement immediately if the underlying transponder lease between
Microspace and Hughes (the Hughes lease) terminates for reasons beyond the
control of Microspace. Termination of the Hughes lease shall not be deemed to be
beyond the control of Microspace if it results from a default of said lease by
Microspace and said default has been acknowledged as such in writing by
Microspace or judicially determined to be such.
10.04 Damages. A termination of this Agreement under Sections 10.01 (a)
-------
and 10.02 (a) shall not limit a Party's right or ability to recover damages
occasioned to such Party as a result of the other Party's breach of this
Agreement.
ARTICLE XI
DEPOSIT
-------
11.01 Deposit. No deposit required.
-------
ARTICLE XII
INDEMNIFICATION AND LIMITATION OF LIABILITY
-------------------------------------------
12.01 Limitation of Liability.
-----------------------
(a) Neither Party shall not be liable for any failure of performance
hereunder due to causes beyond its control, including but not limited to acts of
God; fire, flood or other catastrophes; any law, order, regulation, direction,
action or request of the United States
Page 8
<PAGE>
government, or of any other government, including state and local governments
having jurisdiction over such Party, or of any department, agency, commission,
bureau, corporation or other instrumentality of any one or more said
governments, or of any civil or military authority, national emergencies,
insurrections; riots, wars, or strikes, lockouts, work stoppages or other labor
difficulties;
(b) Except with respect to an intentional breach by Microspace of
Section 2.02 or Section 13.15, the liability of Microspace for damages or losses
of any kind arising out of its furnishing Service to the Customer hereunder
shall not include consequential damages, as defined in Section 2.02 above;
(c) Microspace shall not be liable for any act or omission of any
other entity furnishing to the Customer facilities or equipment used with the
Service nor shall Microspace be liable for any damages or losses due to the
fault or negligence of the Customer or to the failure of Customer-provided
equipment or facilities.
12.02 Indemnification by Customer. Customer shall indemnify and hold
---------------------------
Microspace and its affiliates, its and their officers, employees or agents, or
any of them, whether acting through Microspace or otherwise, harmless from and
against:
(a) Use by Customer. All loss, liability, damage and expense,
---------------
including reasonable counsel fees due to claims for libel, slander, infringement
of copyright arising from the material transmitted by Customer over Microspace's
facilities; and any other claim resulting from any negligent or wrongful act or
omission of Customer or patrons of Customer and relating to the Service
furnished by Microspace;
(b) Misrepresentation, Breach, etc. Any and all damages occasioned
------------------------------
by, arising out of or resulting from any material misrepresentation, intentional
breach of warranty or covenant, or intentional default or intentional
nonfulfillment of any agreement on the part of Customer under this Agreement or
under any certificate, agreement, exhibit, schedule or other instrument
furnished to Microspace pursuant to this Agreement or in connection with any of
the transactions contemplated hereby;
(c) Defense of Third Party Claims. Microspace shall notify Customer
-----------------------------
within ten (10) days of its being served with a lawsuit, and otherwise within
thirty (30) days of its actual knowledge of the occurrence of any event, or of
its discovery of any facts, which in its opinion entitle or may entitle it to
indemnification from a third party claim under this Article. Microspace's
failure to do so shall preclude it from seeking indemnification hereunder unless
such failure has not prejudiced the Customer's ability to defend such claim.
Customer shall promptly defend such claim by counsel of its own choosing at its
own
Page 9
<PAGE>
cost and expense and Microspace shall cooperate with Customer in the defense
of such claim including the settlement of the matter on the basis stipulated by
Customer (with Customer being responsible for all costs and expenses of such
settlement). If Customer within reasonable time after notice of a claim fails
to defend Microspace, Microspace shall be entitled to undertake the defense,
compromise or settlement of such claim at the expense of and for the account and
risk of Customer;
(d) Right to Defend. If there is a reasonable probability that
---------------
resolution of a claim in the manner provided in paragraph (c) above will
materially and adversely affect Microspace, Microspace shall have the right, at
its own cost and expense, to defend, compromise or settle such claim against it;
(e) Claim Against Third Party. If the facts giving rise to
-------------------------
indemnification hereunder shall involve a possible claim by Microspace against a
third party, Microspace shall have the right, at its own costs and expense, to
undertake the prosecution, compromise and settlement of such claim;
(f) Release. Customer shall not, without Microspace's consent, settle
-------
or compromise any claim or consent to any entry of judgment which does not
include as a term thereof an unconditional release by the claimant or plaintiff
of Microspace from all liability with respect to such claim.
ARTICLE XIII
MISCELLANEOUS
-------------
13.01 Public Notice, Confidentiality and Proprietary Information.
----------------------------------------------------------
Notwithstanding any termination of this Agreement, Microspace and Customer shall
hold in confidence the information contained in this Agreement, and Microspace
and Customer hereby acknowledge that all information related to this Agreement
is confidential and proprietary and is not to be disclosed to third persons,
without the prior consent of both Microspace and Customer. Neither Microspace
nor Customer shall disclose to any third party (other than Hughes) the existence
of, or any of the terms and provisions of, this Agreement except as provided in
this Section 13.01. Neither Party shall issue a public notice or a news release
concerning this Agreement and the transactions contemplated hereby without the
prior approval of the other Party, which approval shall include the right to
approve the form, content and timing of any such release. To the extent that
either Party discloses additional information which it considers proprietary, it
shall identify such information as proprietary when disclosing it to the other
Party by marking it clearly and conspicuously as proprietary information;
provided, however, that Microspace understands and agrees that the names and
locations of Customer's patrons and affiliates are
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<PAGE>
confidential and proprietary and need not be identified as such at the time of
disclosure to Microspace. Any proprietary disclosure to either Party, if made
orally, shall be promptly confirmed in writing and identified as proprietary
information, if the disclosing Party wishes to keep such information proprietary
under this Agreement. Any such information disclosed under this Agreement shall
be used by the recipient thereof only in its performance under this Agreement.
Notwithstanding the foregoing, neither Party shall be liable for disclosure or
use of such proprietary information (but shall notify the other Party prior to
such disclosure or use) which is:
(a) Applicable Law. Required to be disclosed to the extent necessary
--------------
to comply with law or the valid order of a governmental agency or court of
competent jurisdiction;
(b) Internal Business Matter. Disclosed as part of its normal
------------------------
procedures to its officers, directors, parent company, auditors and attorneys,
each of whom shall agree to be bound by the provisions and spirit of this
Section;
(c) Enforcement of Rights. Disclosed in order to enforce its rights
---------------------
and perform its obligations pursuant to this Agreement;
(d) Financing and Disposition. Disclosed to the extent necessary as
-------------------------
part of a sale, lease or financing arrangement, to its purchasers, lessees,
investment bankers, independent auditors or legal counsel and their agents,
representatives or independent contractors or any financial institution;
provided, however, that such parties shall agree in writing to be bound by the
provisions and spirit of this Section;
(e) Public Information. Available or becomes available to the public
------------------
from a source other than the receiving Party before or during the period of this
Agreement, is lawfully obtained by the receiving Party from a third party or
parties, or is known by the receiving Party prior to such disclosure;
(f) Release. Released without restrictions in writing by the
-------
disclosing Party; or
(g) Independent Development. At any time developed by the receiving
-----------------------
Party completely independently of and prior to any such disclosure or
disclosures from the disclosing Party when such development can be documented to
have occurred prior to a disclosure. No license to the other Party, under any
patents, is granted or implied by conveying proprietary information or other
information to that Party.
Notwithstanding the foregoing, the existence (but not the material
terms) of this Agreement may be disclosed to the patrons and
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<PAGE>
affiliates of Customer to the extent necessary to establish proper transmission
of music and other communications services to such individuals and entities
through the leased transponder channels.
13.02 Not Fiduciaries. Nothing contained in this Agreement shall be deemed
---------------
or construed by the Parties hereto or by any third party to create any rights,
obligations or interests in third parties; to create the relationship of
principal and agent, partnership or joint venture or of any other fiduciary
relationship or association between the Parties.
13.03 Waiver. No failure on the part of either Party to notify the other
------
Party of any noncompliance hereunder, and no failure on the part of either Party
to exercise its rights hereunder shall prejudice any remedy for any subsequent
noncompliance, and any waiver by either Party of any breach or noncompliance
with any term or condition of this Agreement shall be limited to the particular
instance and shall not operate or be deemed to waive any future breaches or
noncompliance with any term or condition. All remedies and rights hereunder and
those available in law or in equity shall be cumulative and the exercise by a
Party of any such right or remedy shall not preclude the exercise of any other
right or remedy available under this Agreement in law or in equity.
13.04 Assignment and Binding Effect. This Agreement may be assigned by
-----------------------------
either Party to a third party during the term of this Agreement without the
written consent of the other Party.
13.05 Taxes. Customer shall not be responsible for any taxes and similar
-----
liabilities, including sales, use, income and personal property taxes, which may
be required under any federal, state or local laws with respect to the
Transponders used by Customer hereunder.
13.06 Expenses. Except as otherwise provided herein, each Party hereto
--------
shall bear its own expenses incurred in connection with the transactions
pursuant to this Agreement.
13.07 Construction. This Agreement shall be construed and enforced in
------------
accordance with the internal substantive laws of the State of North Carolina
except for conflicts of laws. The Parties hereby consent and submit to the
jurisdiction of the federal and state courts located in the State of North
Carolina, and any action or suit under this Agreement may be brought by the
Parties in any federal or state court with appropriate jurisdiction over the
subject matter established or sitting in the State of North Carolina. The
Parties shall not raise in connection therewith, and hereby waive, any defenses
based upon the venue, the inconvenience of the forum, the lack of personal
jurisdiction, the sufficiency of Service of process or the like in any such
action or suit brought in the State of North Carolina. If any action or
proceeding is brought for the enforcement of this Agreement, the successful or
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<PAGE>
prevailing party or parties shall be entitled to recover reasonable attorney's
fees and other costs incurred in the action or proceeding, in addition to any
other relief to which it or they may be entitled.
13.08 Notices. All necessary notices, demands, reports, orders and
-------
requests required or permitted hereunder shall be deemed to be duly given only
if and on the date sent by Federal Express, Express Mail, or other means of
overnight courier services requiring a signature upon delivery, mailed by
certified or registered United States mail, postage prepaid, return receipt
requested, or delivered by hand and addressed as follows:
(a) If to be given to Microspace:
Mr. Joseph L. Amor III
Microspace Communications Corporation
3100 Highwoods Boulevard
Raleigh, NC 27604
and
Mr. James F. Goodmon
Capitol Broadcasting Company
711 Hillsborough Street
Box 12800
Raleigh, NC 27605
(b) If to be given to Customer:
Mr. Thomas J. Gentry
Muzak DBS Division
3100 Highwoods Boulevard
Raleigh, NC 27604
and
Mr. John R. Jester
Muzak Limited Partnership
400 North 34th Street, Suite 200
Seattle, WA 98103
or to such other addresses as the Parties may specify in writing.
13.09 Headings. The headings of the Articles, Sections, Paragraphs and
--------
Subparagraphs of this Agreement are inserted as a matter of convenience and for
reference purposes only, are of no binding effect, and in no respect define,
limit or describe the scope of this Agreement or the intent of any provision
hereof.
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<PAGE>
13.10 Exhibits. All Exhibits attached to this Agreement shall be deemed
--------
part of this Agreement and incorporated herein as if fully set forth herein, and
in the event of a variation or an inconsistency between this Agreement and the
Exhibits attached hereto, the Agreement shall govern.
13.11 Ambiguities. This Agreement and the Exhibits hereto have been
-----------
drafted jointly by the Parties and in the event of any ambiguities in the
language hereof, there shall be no inference drawn in favor of either Party.
13.12 Entire Agreement. This Agreement, including the "WHEREAS" clauses on
----------------
Page 1, and all Exhibits hereto, represent the entire understanding and
agreement between the Parties hereto with respect to the subject matter hereof,
supersede all prior negotiations between such Parties, and can be amended,
supplemented or changed only by an agreement in writing which makes specific
reference to this Agreement and which is signed by both Parties.
13.13 Counterparts. This Agreement may be signed in counterpart and in
------------
multiple copies, and each such copy having all signatures attached thereto shall
constitute an original hereof.
13.14 Technical Support. During the term of this Agreement, Microspace
-----------------
will provide technical and operational support to Customer with respect to
transmission frequency planning and equipment modulation configuration, transmit
channel additions, software interface requirements and headend equipment
interface standards.
13.15 Hughes Communications Lease. Microspace hereby affirms and agrees
---------------------------
that it will use its best efforts properly to perform its obligations and
exercise its rights under the Hughes lease for the benefit of Customer as well
as itself and that, as afforded by the Hughes lease, in the event of its default
under such lease, Customer shall have the right (contingent on approval by
Hughes) to assume Microspace's rights and obligations under said lease to the
extent necessary to provide continued access to the transponder channels leased
by Customer under this Agreement. In the event of default, Microspace will use
its reasonable best efforts to seek Hughes' consent to assignment of the
transponder lease to Customer. Unless Microspace's breach of this Section 13.15
is intentional, Microspace will not be liable to Customer for consequential
damages, as defined in Section 2.02, for such breach. For purposes of this
provision, Microspace shall be deemed to be in default of the Hughes lease if
such default is acknowledged by it in writing or is judicially determined.
13.16 Representations and Warranties. Microspace represents and warrants
------------------------------
that, as of the date hereof, its lease with Hughes is a valid and binding lease
of the Transponder channels that are the subject of
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<PAGE>
this Agreement, it has performed its obligations and is in good standing under
the Hughes lease, and it knows of no breach or default by Hughes of the Hughes
lease. Each of the Parties hereto further represents and warrants to the other
that, as of the date hereof, (i) it has all necessary rights and powers to enter
into and fully perform this Agreement, (ii) this Agreement constitutes a valid
and binding obligation of such Party, (iii) it has no knowledge of any agreement
or arrangement which conflict with this Agreement or which limit or could
reasonably be expected to limit the performance of its obligations under this
Agreement, and (iv) it is in full compliance with all local, state, and federal
laws, rules, and regulations applicable to its performance of this Agreement. In
the event of a material breach of the foregoing representation and warranties,
Customer (if the breaching Party) shall indemnify and hold harmless Microspace
and its affiliates, its and their officers, employees or agents, or any of them,
as provided in Section 12.02, and Microspace (if the breaching Party) shall
indemnify and hold harmless Customer and its affiliates, its and their officers,
employees or agents, or any of them, from and against any and all damages
occasioned by, arising out of or resulting from such breach.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
MICROSPACE COMMUNICATIONS CORPORATION
By: /s/ Joseph L. Amor III
-------------------------------------
Joseph L. Amor III
Vice President and General Manager
Attest: [SIGNATURE ILLEGIBLE]
---------------------------------
MUZAK LIMITED PARTNERSHIP
By: /s/ Thomas J. Gentry
-------------------------------------
Thomas J. Gentry
Vice President and General Manager
Attest: [SIGNATURE ILLEGIBLE]
---------------------------------
Page 15
<PAGE>
Exhibit 10.26
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been separately
filed with the Commission.
TRANSPONDER LEASE AGREEMENT
---------------------------
THIS AGREEMENT, made and entered into this 29th day of April, 1996, by and
---- -----
between Microspace Communications Corporation, a North Carolina corporation
("Microspace"), and Muzak Limited Partnership, a limited partnership with
principal offices in Seattle, Washington ("Customer").
WITNESSETH:
WHEREAS, Microspace has leased C-band transponder capacity on the Satellite
known as GE Satcom C-5; and
WHEREAS, Customer desires to use part of the transponder capacity leased by
Microspace for the purpose of SCPC transmission; and
WHEREAS, Microspace desires to provide such Service to Customer pursuant to
the terms and conditions hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein made, the Parties, intending to be legally bound, hereby
mutually agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
meanings:
1.01 "Agreement" means this Agreement.
1.02 "C-5" means the domestic communications satellite designed to operate
in the C-band, positioned at the 139 degrees W.L. orbital position.
1.03 "Microspace's Transponder" means that portion of a transponder or
transponders on C-5 leased by Microspace.
1.04 "Parties" means the signatories to this Agreement and a "Party" means
one of such signatories.
1.05 "Transponder" or "Transponders" means Microspace's Transponder.
1.06 "Transponder Failure" means with respect to Microspace's Transponder,
any of the following events:
Page 1
<PAGE>
(a) Twenty (20) or more "outage units" shall occur within any thirty
(30) consecutive days (an outage unit being an interruption of Microspace's
Transponder such that an Outage Allowance is due under Article V of this
Agreement);
(b) Microspace's Transponder shall fail to meet Transponder
Performance Specifications for twelve (12) consecutive days.
1.07 "Transponder Performance Specifications" means those specifications
for the design and performance of the C-5 Transponders contained in Exhibit A.
1.08 "Transponder Spares" means certain redundant transponder equipment
units which are designed as substitutes for equipment component units, the
failure of which could cause a transponder to fail to meet the Transponder
Performance Specifications.
1.09 "Customer's Signal" means the complete intelligence to be transmitted
to Microspace's Transponder on behalf of Customer pursuant to this Agreement.
1.10 "Service" means the Transponder Capacity leased by Customer from
Microspace.
ARTICLE II
SERVICE
-------
2.01 Transponder Service. Beginning in 1991, Customer took full-time
-------------------
Service from Microspace as specified in Exhibit B, "Technical Specifications",
Part 1, "Individual SCPC Specifications." During the term of this Agreement,
Microspace shall provide transponder capacity to Customer, subject and according
to the terms hereof, on a full-time (24 hours a day, 7 days a week) basis.
2.02 Orbital Location. Customer's Transponder Capacity shall be provided
----------------
on C-5 satellite from the 139 degrees W.L. orbital location.
2.03 Uplink Facilities. Microspace shall provide transmitting equipment
-----------------
and related facilities (hereinafter "Uplink Facilities") sufficient to transmit
Customer's Signals from the ground to Microspace's Transponder subject to the
following conditions:
(a) The Uplink Facilities shall be located in or near Raleigh, North
Carolina;
(b) Microspace will provide, operate and maintain transmitting
equipment which will be capable of sending Customer's
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<PAGE>
Signal to Microspace's Transponder if Customer's Signal is configured so that it
is technically compatible with the transmitting equipment provided by
Microspace;
(c) Microspace will operate the Uplink Facilities in a reasonable
manner consistent with the type of equipment located thereon. Unless Microspace
commits an intentional breach, it will not be liable for consequential damages
for breach of this provision. As used herein, "consequential damages" includes
revenues lost to Customer as a result of the inability of Customer to transmit
Customer's Signal but does not mean the costs incurred by Customer in replacing
damaged property or in securing replacement facilities or replacement
transponder capacity;
(d) Customer will adhere to all reasonable rules and regulations
established by Microspace for the Uplink Facilities, including, but not limited
to, access by third persons;
(e) Microspace will provide Customer space within a building at the
Uplink Facilities sufficient to accommodate modulation equipment required for
transmission of Customer's channels as defined in the Exhibits of this
Agreement. Customer will pay no rent for said space. Additional rack space
will be leased to Customer, if requested, at rates to be agreed upon, subject to
space available:
(i) All taxes or assessments which are incurred as the result of
the installation and operation of Customer's equipment will be paid by Customer
in a timely manner;
(ii) Microspace will provide electric power and temporary
emergency backup electrical power for the operation of Customer's equipment
without charge. Microspace will use all reasonable efforts to maintain a
suitable environment within the building to support the operation of standard
electrical devices typically installed in Uplink Facilities;
(iii) Microspace will not be responsible for damage to or
destruction of Customer's equipment located at the Uplink Facilities unless the
damage or destruction is caused by Microspace's gross negligence or willful
misconduct.
ARTICLE III
SERVICE TERM
------------
3.01 Term. Customer began taking Service as provided herein for a term
----
commencing in 1991 and continuing until the Expiration Date, as defined below:
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<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
"Expiration Date": Upon the earlier to occur:
(a) June 30, 1998; or
(b) The termination or cancellation of this Agreement as provided in
Article X of this Agreement.
ARTICLE IV
MONTHLY CHARGE AND METHOD OF PAYMENT
------------------------------------
4.01 Monthly Charge. Customer shall pay to Microspace monthly, in
--------------
advance, the sum of [**].
If the term should not commence on the first day of a month or end on
the last day of a month, the monthly charge for the fractional part of the month
shall be calculated at a daily rate of one-thirtieth of the monthly charge
specified in the above paragraph.
All payments shall be made to Microspace at its address as designated
in Paragraph 13.08 and shall be deemed to be made upon receipt thereof by
Microspace. Microspace shall assess a late payment charge of one and one-half
percent (1.5%) compounded monthly on payments received after the due date.
4.02 [**].
ARTICLE V
INTERRUPTION OF TRANSMISSIONS OVER TRANSPONDERS
-----------------------------------------------
5.01 Outage Allowance. If applicable, Microspace shall grant Customer an
----------------
Outage Allowance, as follows:
If an "Outage Allowance Failure Period" (as defined below) occurs,
then for each full hour of such Outage Allowance Failure Period Microspace shall
grant Customer a pro rata Outage Allowance based upon the monthly charge for
Customer's Transponder Capacity and the length of the Outage Allowance Failure
Period, calculated pursuant to
Page 4
<PAGE>
the equation below. Any such Outage Allowance shall be applied to the next
succeeding monthly billing to Customer and shall not in any case exceed one
month's standard billing. As used herein, "Outage Allowance Failure Period"
shall mean the aggregate period (in hours) -- only where such aggregation
exceeds twelve (12) hours during any consecutive thirty (30) day period --
during which a Transponder Capacity Failure(s) occurs. For purposes of this
Agreement, A Transponder Capacity Failure shall be measured from the time
Microspace receives notice from Customer of the Transponder Capacity Failure
until the time the Transponder has been restored to operation, but shall not
begin in any event until Customer ceases to use Customer's Transponder Capacity.
Outage Allowance = Outage Allowance Failure Period (In Hours) X Monthly Lease
-----------------------------------------------------------------------------
Payment
-------
720 Hours/Month
In no case shall an Outage Allowance be made for any Transponder
Capacity Failure related to: (i) any failure on the part of Customer to perform
its transmission or other material or operational obligations pursuant to this
Agreement, (ii) failure of facilities provided by Customer, (iii) reasonable
periodic maintenance, (iv) interference from third party transmissions or usage,
(v) cooperative testing, except where trouble or fault is found in the
Transponder or (vi) any other act or failure to act by Customer.
5.02 Resolution of Credit Disputes. In the event that Microspace and
-----------------------------
Customer cannot agree on the amount of credit due Customer following an
interruption, Customer may withhold payment of the disputed amount until
Microspace and Customer resolve the dispute; provided, however, that should a
credit dispute or disputes arise totaling two months Service fees or more in the
aggregate, Microspace or Customer may cancel this Agreement on thirty (30) days
written notice and pursue all legal remedies available to resolve the dispute,
including claims of breach for wrongful termination.
ARTICLE VI
TRANSPONDER PROTECTION
----------------------
6.01 Restoration of Service. If Microspace's Transponder suffers a
----------------------
Transponder Failure, Customer shall remain bound by this Agreement if
Microspace's Transponder is restored within two hundred forty (240) hours using
a Transponder Spare or unused transponder per the underlying lease agreement.
If it is not so restored, Customer may terminate this Agreement
immediately and without any notice to Microspace. In the event that the
Satellite is prematurely removed from service and if Microspace has, pursuant to
the underlying lease, preferential rights to replacement transponder capacity on
a successor satellite, Customer
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<PAGE>
shall have the corresponding right to sublease transponder service from
Microspace on such successor satellite.
ARTICLE VII
TRACKING, TELEMETRY AND CONTROL
-------------------------------
7.01 Throughout the term of this Agreement, GE shall be responsible for
all the functions of Tracking, Telemetry and Control ("TT&C") including, without
limitation, stationkeeping, attitude control, and other satellite maintenance
and switching functions.
ARTICLE VIII
REPORTS AND COMMUNICATIONS
--------------------------
Microspace shall provide Customer with the following reports regarding the
operation of the satellite and the associated TT&C facilities:
8.01 Anomalous Operation Notification. Microspace shall notify Customer
--------------------------------
as soon as possible by telephone with prompt written confirmation of any
significant incidents that have been brought to its attention by GE which have a
material effect on Microspace's Transponder. Microspace also shall notify
Customer promptly of any circumstances that are brought to its attention which
make it clearly ascertainable or predictable that any of the incidents described
in this section will occur.
8.02 Maneuver Notification. Microspace shall notify Customer of all non-
---------------------
emergency maneuvers of The Satellite which would result in a change in the
orbital location of The Satellite within two (2) days of receiving notification
of the same from GE.
ARTICLE IX
USE OF TRANSPONDERS
-------------------
9.01 Use of and Right of Transponders. Customer shall have the right to
--------------------------------
use the Service, including transponder channels, provided hereunder for any
lawful purpose.
ARTICLE X
TERMINATION
-----------
10.01 Termination by Customer. Anything set forth herein to the contrary
-----------------------
notwithstanding, upon the occurrence of any of the following
Page 6
<PAGE>
events Customer may terminate this Agreement within ninety (90) days of actual
knowledge of the events giving rise to the right to termination:
(a) Breach or Default. If Microspace commits a material breach or
-----------------
default of any of the provisions of this Agreement and such breach or default
has not been cured within thirty (30) days after receipt by Microspace of
Customer's notice of such breach or default;
(b) Governmental Restrictions. If the performance of this Agreement
-------------------------
pursuant to the terms hereof has been prohibited by any federal, state or local
court, governmental or regulatory body, and Service has been interrupted for a
period of two hundred forty (240) hours or more as a result.
10.02 Termination Notice. Anything set forth herein to the contrary
------------------
notwithstanding, upon the occurrence of any of the following events Microspace
may terminate this Agreement upon ten (10) days prior notice of intent to
terminate to Customer:
(a) Breach or Default. If Customer commits a material breach or
-----------------
default of any of the provisions of this Agreement, including, but not limited
to a failure to pay timely the monthly charge due under Article IV, and such
breach or default has not been cured within thirty (30) days after receipt by
Customer of Microspace's notice of such breach or default;
(b) Governmental Restrictions. If performance of this Agreement
-------------------------
pursuant to the terms hereof has been prohibited by any federal, state or local
court, governmental or regulatory body, and performance by Customer has been
interrupted for a period of two hundred forty (240) hours or more as a result.
10.03 Termination by Microspace Without Notice. Microspace can terminate
----------------------------------------
this Agreement immediately if the underlying transponder lease terminates for
reasons beyond the control of Microspace. Termination of the underlying lease
shall not be deemed to be beyond the control of Microspace if it results from a
default of said lease by Microspace and said default has been acknowledged as
such in writing by Microspace or judicially determined to be such.
10.04 Damages. A termination of this Agreement under Sections 10.01(a) and
-------
10.02(a) shall not limit a Party's right or ability to recover damages
occasioned to such Party as a result of the other Party's breach of this
Agreement.
ARTICLE XI
DEPOSIT
-------
11.01 Deposit. No deposit required.
-------
Page 7
<PAGE>
ARTICLE XII
INDEMNIFICATION AND LIMITATION OF LIABILITY
-------------------------------------------
12.01 Limitation of Liability.
-----------------------
(a) Neither Party shall not be liable for any failure of performance
hereunder due to causes beyond its control, including but not limited to acts of
God; fire, flood or other catastrophes; any law, order, regulation, direction,
action or request of the United States government, or of any other government,
including state and local governments having jurisdiction over such Party, or of
any department, agency, commission, bureau, corporation or other instrumentality
of any one or more said governments, or of any civil or military authority,
national emergencies, insurrections; riots, wars, or strikes, lockouts, work
stoppages or other labor difficulties;
(b) Except with respect to an intentional breach by Microspace of
Section 2.02 or Section 13.15, the liability of Microspace for damages or losses
of any kind arising out of its furnishing Service to the Customer hereunder
shall not include consequential damages, as defined in Section 2.02 above;
(c) Microspace shall not be liable for any act or omission of any
other entity furnishing to the Customer facilities or equipment used with the
Service nor shall Microspace be liable for any damages or losses due to the
fault or negligence of the Customer or to the failure of Customer-provided
equipment or facilities.
12.02 Indemnification by Customer. Customer shall indemnify and hold
---------------------------
Microspace and its affiliates, its and their officers, employees or agents, or
any of them, whether acting through Microspace or otherwise, harmless from and
against:
(a) Use by Customer. All loss, liability, damage and expense,
---------------
including reasonable counsel fees due to claims for libel, slander, infringement
of copyright arising from the material transmitted by Customer over Microspace's
facilities; and any other claim resulting from any negligent or wrongful act or
omission of Customer or patrons of Customer and relating to the Service
furnished by Microspace;
(b) Misrepresentation, Breach, etc. Any and all damages occasioned
------------------------------
by, arising out of or resulting from any material misrepresentation, intentional
breach of warranty or covenant, or intentional default or intentional
nonfulfillment of any agreement on the part of Customer under this Agreement or
under any certificate, agreement, exhibit, schedule or other instrument
furnished to
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<PAGE>
Microspace pursuant to this Agreement or in connection with any of the
transactions contemplated hereby;
(c) Defense of Third Party Claims. Microspace shall notify Customer
-----------------------------
within ten (10) days of its being served with a lawsuit, and otherwise within
thirty (30) days of its actual knowledge of the occurrence of any event, or of
its discovery of any facts, which in its opinion entitle or may entitle it to
indemnification from a third party claim under this Article. Microspace's
failure to do so shall preclude it from seeking indemnification hereunder unless
such failure has not prejudiced the Customer's ability to defend such claim.
Customer shall promptly defend such claim by counsel of its own choosing at its
own cost and expense and Microspace shall cooperate with Customer in the defense
of such claim including the settlement of the matter on the basis stipulated by
Customer (with Customer being responsible for all costs and expenses of such
settlement). If Customer within reasonable time after notice of a claim fails
to defend Microspace, Microspace shall be entitled to undertake the defense,
compromise or settlement of such claim at the expense of and for the account and
risk of Customer;
(d) Right to Defend. If there is a reasonable probability that
---------------
resolution of a claim in the manner provided in paragraph (c) above will
materially and adversely affect Microspace, Microspace shall have the right, at
its own cost and expense, to defend, compromise or settle such claim against it;
(e) Claim Against Third Party. If the facts giving rise to
-------------------------
indemnification hereunder shall involve a possible claim by Microspace against a
third party, Microspace shall have the right, at its own costs and expense, to
undertake the prosecution, compromise and settlement of such claim;
(f) Release. Customer shall not, without Microspace's consent,
-------
settle or compromise any claim or consent to any entry of judgment which does
not include as a term thereof an unconditional release by the claimant or
plaintiff of Microspace from all liability with respect to such claim.
ARTICLE XIII
MISCELLANEOUS
-------------
13.01 Public Notice, Confidentiality and Proprietary Information.
----------------------------------------------------------
Notwithstanding any termination of this Agreement, Microspace and Customer shall
hold in confidence the information contained in this Agreement, and Microspace
and Customer hereby acknowledge that all information related to this Agreement
is confidential and proprietary and is not to be disclosed to third persons,
without the prior consent of both Microspace and Customer. Neither Microspace
nor Customer
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<PAGE>
shall disclose to any third party the existence of, or any of the terms and
provisions of, this Agreement except as provided in this Section 13.01. Neither
Party shall issue a public notice or a news release concerning this Agreement
and the transactions contemplated hereby without the prior approval of the other
Party, which approval shall include the right to approve the form, content and
timing of any such release. To the extent that either Party discloses additional
information which it considers proprietary, it shall identify such information
as proprietary when disclosing it to the other Party by marking it clearly and
conspicuously as proprietary information; provided, however, that Microspace
understands and agrees that the names and locations of Customer's patrons and
affiliates are confidential and proprietary and need not be identified as such
at the time of disclosure to Microspace. Any proprietary disclosure to either
Party, if made orally, shall be promptly confirmed in writing and identified as
proprietary information, if the disclosing Party wishes to keep such information
proprietary under this Agreement. Any such information disclosed under this
Agreement shall be used by the recipient thereof only in its performance under
this Agreement. Notwithstanding the foregoing, neither Party shall be liable for
disclosure or use of such proprietary information (but shall notify the other
Party prior to such disclosure or use) which is:
(a) Applicable Law. Required to be disclosed to the extent necessary
--------------
to comply with law or the valid order of a governmental agency or court of
competent jurisdiction;
(b) Internal Business Matter. Disclosed as part of its normal
------------------------
procedures to its officers, directors, parent company, auditors and attorneys,
each of whom shall agree to be bound by the provisions and spirit of this
Section;
(c) Enforcement of Rights. Disclosed in order to enforce its rights
---------------------
and perform its obligations pursuant to this Agreement;
(d) Financing and Disposition. Disclosed to the extent necessary as
-------------------------
part of a sale, lease or financing arrangement, to its purchasers, lessees,
investment bankers, independent auditors or legal counsel and their agents,
representatives or independent contractors or any financial institution;
provided, however, that such parties shall agree in writing to be bound by the
provisions and spirit of this Section;
(e) Public Information. Available or becomes available to the public
------------------
from a source other than the receiving Party before or during the period of this
Agreement, is lawfully obtained by the receiving Party from a third party or
parties, or is known by the receiving Party prior to such disclosure;
(f) Release. Released without restrictions in writing by the
-------
disclosing Party; or
Page 10
<PAGE>
(g) Independent Development. At any time developed by the receiving
-----------------------
Party completely independently of and prior to any such disclosure or
disclosures from the disclosing Party when such development can be documented to
have occurred prior to a disclosure. No license to the other Party, under any
patents, is granted or implied by conveying proprietary information or other
information to that Party.
Notwithstanding the foregoing, the existence (but not the material
terms) of this Agreement may be disclosed to the patrons and affiliates of
Customer to the extent necessary to establish proper transmission of music and
other communications services to such individuals and entities through the
leased transponder channels.
13.02 Not Fiduciaries. Nothing contained in this Agreement shall be deemed
---------------
or construed by the Parties hereto or by any third party to create any rights,
obligations or interests in third parties; to create the relationship of
principal and agent, partnership or joint venture or of any other fiduciary
relationship or association between the Parties.
13.03 Waiver. No failure on the part of either Party to notify the other
------
Party of any noncompliance hereunder, and no failure on the part of either Party
to exercise its rights hereunder shall prejudice any remedy for any subsequent
noncompliance, and any waiver by either Party of any breach or noncompliance
with any term or condition of this Agreement shall be limited to the particular
instance and shall not operate or be deemed to waive any future breaches or
noncompliance with any term or condition. All remedies and rights hereunder and
those available in law or in equity shall be cumulative and the exercise by a
Party of any such right or remedy shall not preclude the exercise of any other
right or remedy available under this Agreement in law or in equity.
13.04 Assignment and Binding Effect. This Agreement may be assigned by
-----------------------------
either Party to a third party during the term of this Agreement without the
written consent of the other Party.
13.05 Taxes. Customer shall not be responsible for any taxes and similar
-----
liabilities, including sales, use, income and personal property taxes, which may
be required under any federal, state or local laws with respect to the
Transponders used by Customer hereunder.
13.06 Expenses. Except as otherwise provided herein, each Party hereto
--------
shall bear its own expenses incurred in connection with the transactions
pursuant to this Agreement.
13.07 Construction. This Agreement shall be construed and enforced in
------------
accordance with the internal substantive laws of the State
Page 11
<PAGE>
of North Carolina except for conflicts of laws. The Parties hereby consent and
submit to the jurisdiction of the federal and state courts located in the State
of North Carolina, and any action or suit under this Agreement may be brought by
the Parties in any federal or state court with appropriate jurisdiction over the
subject matter established or sitting in the State of North Carolina. The
Parties shall not raise in connection therewith, and hereby waive, any defenses
based upon the venue, the inconvenience of the forum, the lack of personal
jurisdiction, the sufficiency of Service of process or the like in any such
action or suit brought in the State of North Carolina. If any action or
proceeding is brought for the enforcement of this Agreement, the successful or
prevailing party or parties shall be entitled to recover reasonable attorney's
fees and other costs incurred in the action or proceeding, in addition to any
other relief to which it or they may be entitled.
13.08 Notices. All necessary notices, demands, reports, orders and
-------
requests required or permitted hereunder shall be deemed to be duly given only
if and on the date sent by Federal Express, Express Mail, or other means of
overnight courier services requiring a signature upon delivery, mailed by
certified or registered United States mail, postage prepaid, return receipt
requested, or delivered by hand and addressed as follows:
(a) If to be given to Microspace:
Mr. Joseph L. Amor III
Microspace Communications Corporation
3100 Highwoods Boulevard
Raleigh, NC 27604
and
Mr. James F. Goodmon
Capitol Broadcasting Company
711 Hillsborough Street
Box 12800
Raleigh, NC 27605
(b) If to be given to Customer:
Mr. Thomas J. Gentry
Muzak DBS Division
3100 Highwoods Boulevard
Raleigh, NC 27604
and
Mr. John R. Jester
Muzak Limited Partnership
400 North 34th Street, Suite 200
Seattle, WA 98103
Page 12
<PAGE>
or to such other addresses as the Parties may specify in writing.
13.09 Headings. The headings of the Articles, Sections, Paragraphs and
--------
Subparagraphs of this Agreement are inserted as a matter of convenience and for
reference purposes only, are of no binding effect, and in no respect define,
limit or describe the scope of this Agreement or the intent of any provision
hereof.
13.10 Exhibits. All Exhibits attached to this Agreement shall be deemed
--------
part of this Agreement and incorporated herein as if fully set forth herein, and
in the event of a variation or an inconsistency between this Agreement and the
Exhibits attached hereto, the Agreement shall govern.
13.11 Ambiguities. This Agreement and the Exhibits hereto have been
-----------
drafted jointly by the Parties and in the event of any ambiguities in the
language hereof, there shall be no inference drawn in favor of either party.
13.12 Entire Agreement. This Agreement, including the "WHEREAS" clauses on
----------------
Page 1, and all Exhibits hereto, represent the entire understanding and
agreement between the Parties hereto with respect to the subject matter hereof,
supersede all prior negotiations between such Parties, and can be amended,
supplemented or changed only by an agreement in writing which makes specific
reference to this Agreement and which is signed by both Parties.
13.13 Counterparts. This Agreement may be signed in counterpart and in
------------
multiple copies, and each such copy having all signatures attached thereto shall
constitute an original hereof.
13.14 Technical Support. During the term of this Agreement, Microspace
-----------------
will provide technical and operational support to Customer with respect to
transmission frequency planning and equipment modulation configuration, transmit
channel additions, software interface requirements and headend equipment
interface standards.
13.15 GE Communications Lease. Microspace hereby affirms and agrees that
-----------------------
it will use its best efforts properly to perform its obligations and exercise
its rights under the underlying lease for the benefit of Customer as well as
itself and that, as afforded by the underlying lease, in the event of its
default under such lease, Customer shall have the right (contingent on approval
by GE) to assume Microspace's rights and obligations under said lease to the
extent necessary to provide continued access to the transponder channels leased
by Customer under this Agreement. In the event of default, Microspace will use
its reasonable best efforts to seek GE' consent to assignment of the transponder
lease to Customer. Unless Microspace's breach of this
Page 13
<PAGE>
Section 13.15 is intentional, Microspace will not be liable to Customer for
consequential damages, as defined in Section 2.02, for such breach. For purposes
of this provision, Microspace shall be deemed to be in default of the underlying
lease if such default is acknowledged by it in writing or is judicially
determined.
13.16 Representations and Warranties. Microspace represents and warrants
------------------------------
that, as of the date hereof, its underlying lease with GE is a valid and binding
lease of the Transponder channels that are the subject of this Agreement, it has
performed its obligations and is in good standing, and it knows of no breach or
default by GE. Each of the Parties hereto further represents and warrants to
the other that, as of the date hereof, (i) it has all necessary rights and
powers to enter into and fully perform this Agreement, (ii) this Agreement
constitutes a valid and binding obligation of such Party, (iii) it has no
knowledge of any agreement or arrangement which conflict with this Agreement or
which limit or could reasonably be expected to limit the performance of its
obligations under this Agreement, and (iv) it is in full compliance with all
local, state, and federal laws, rules, and regulations applicable to its
performance of this Agreement. In the event of a material breach of the
foregoing representation and warranties, Customer (if the breaching Party) shall
indemnify and hold harmless Microspace and its affiliates, its and their
officers, employees or agents, or any of them, as provided in Section 12.02, and
Microspace (if the breaching Party) shall indemnify and hold harmless Customer
and its affiliates, its and their officers, employees or agents, or any of them,
from and against any and all damages occasioned by, arising out of or resulting
from such breach.
Page 14
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
MICROSPACE COMMUNICATIONS CORPORATION
By: /s/ Joseph L. Amor III
--------------------------------
Joseph L. Amor III
Vice President and General Manager
Attest: /s/ Shirley Adams
----------------------------
MUZAK LIMITED PARTNERSHIP
By: /s/ Thomas J. Gentry
--------------------------------
Thomas J. Gentry
Vice President and General Manager
Attest: /s/ Susan A. Tyree
----------------------------
Page 15
<PAGE>
EXHIBIT 10.27
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been separately
filed with the Commission.
[LETTERHEAD OF KEYSTONE COMMUNICATIONS CORPORATION]
AGREEMENT TO PROVIDE TELECOMMUNICATIONS SERVICES
------------------------------------------------
ACCOUNT EXECUTIVE: David W. Hansford
OFFICE TEL.#: 801-325-1108
================================================================================
Keystone Communication Corporation ("Keystone"), a Delaware Corporation, agrees
to provide the facilities and services described herein, to the Customer, for
the specified prices based on the terms and conditions detailed below and on
Attachment A.
================================================================================
Customer: MUZAK
Customer Contact: Mr. John R. Jester
Contact Title: President
Customer Address: 2901 Third Avenue, Suite 400
Seattle, WA 98121
Phone Number: 206-633-3000
Fax Number: 206-633-6210
Contract Date: 5/9/95
Below are the terms under which Keystone Communications ("KEYSTONE OR SUPPLIER")
is prepared to provide satellite transponder service to MUZAK ("MUZAK OR
CUSTOMER"). Keystone will provide MUZAK a recurring schedule of satellite
transponder service during the daytime, Monday through Friday during a period
within each weekday ("WEEKLY INVENTORY") which is defined in Section 3 below, on
the Ku-band satellite transponder 12, or another horizontal polarity
transponder, which is a preemptible transponder on the Hughes Communications
("HUGHES") Galaxy IV satellite (the "TRANSPONDER"). The commitment to purchase
the Weekly Inventory by Muzak may not be canceled during the term of the
Agreement.
This letter shall specify the relationship between the parties concerning the
term, payments and transponder use. When signed by both parties this letter
shall become a binding agreement on both Keystone and Muzak to perform as
specified. Muzak will accept this agreement by signing it and returning two
copies of the accepted agreement. Keystone will accept this agreement when
Keystone has confirmed the necessary transponder control required to enter this
binding agreement If Keystone can not accept the agreement for any reason or
within a period of time not to exceed 15 days from the date of acceptance by
Muzak, Keystone will immediately refund the Advance Payment, specified below in
section 6, which has been paid in advance by Muzak.
On the date Keystone accepts this agreement ("ACCEPTANCE DATE"), Keystone
shall notify Muzak by telephone call and by returning via express mail, one copy
of the executed agreement.
1) TRANSPONDER CONTROL
- -----------------------
A) The transponder lessor ("LESSOR") shall provide Keystone with the right to
schedule, control and market ("USE") the Available Inventory, subject to the
Lessor's right to, with Notice, Preempt the Transponder as defined in this
Agreement. Keystone will obtain Use of the Transponder no later than September
5th, 1995.
8/1/95 Muzak/Keystone (Page 1)
<PAGE>
2) TERM
- --------
The period of agreement between MUZAK and Keystone (the "TERM"), shall begin on
September 5th, 1995 and end on August 31, 1998.
3) SERVICES AND SCHEDULING
- ---------------------------
A) Weekly Inventory
- -------------------
Keystone will provide to Muzak and Muzak commits to purchase during the term,
the following schedule of recurring weekday service, (the "WEEKLY INVENTORY")
which shall include weekdays which may fall on holidays. Service shall not be
provided on September 29th, on October 5th and October 25th, in the year 1995.
These are the only exceptions to the following recurring schedule which shall be
provided. The transponder capacity shall be provided on Ku-band transponder 12
of the Galaxy 4 satellite and shall consist of the full, normal operating power
and bandwidth of the transponder. Keystone may provide all of the Weekly
Inventory on another horizontal polarity transponder on the Galaxy 4 satellite
upon providing Muzak with not less than 55 days advance notice of any
transponder change.
In a full week of service without exception or preemption as provided in this
Agreement the Weekly Inventory shall be 11.5 hours. All times are Eastern
Times.
Mondays 9:00 AM until 12:00 Noon
Tuesdays 9:00 AM until 10:30 AM
Wednesdays 9:00 AM until 10:00 AM and 15:30 until 17:00
Thursdays 9:00 AM until 10:30 AM
Fridays 9:00 AM until 12:00 Noon
The service level shall be classified as occasional and preemptible non
- -----------------------------------------------------------------------
protected service.
- -----------------
B) Additional Inventory
- ------------------------
Additional services may be scheduled with Keystone subject to availability at
the time firm or inquiry orders are placed. Each scheduled order for service
("SERVICE") shall be provided in half hour minimum increments up to the first
hour. Consecutive quarter hour increments will be available for scheduling after
the first hour of service.
Muzak shall specify which Muzak personnel have authorization to schedule
services with Keystone Scheduling personnel and orders from these individuals
shall be binding upon Muzak under the terms of this agreement.
Scheduled use of the transponder for the recurring schedule or any additional
occasional use of the transponder shall not include guaranteed set up time or
crosspole time. Due to limited supply of satellite channel inventory the
Transponder will be scheduled regularly with immediate transitions from one
programming source to another ("HOT SWITCHES"). Muzak must plan and provide for
the necessary time required to access the transponder within the Service
periods. Approximate or Approx. end times shall not be scheduled on this
Transponder. Muzak or Customers of Muzak may not exceed the scheduled time
period without prior authorization from Keystone's Network Control.
C) Preemption
- --------------
The Lessor will have the right, to Preempt the Available Inventory ("PREEMPT")
either on an occasional basis or on a regularly scheduled basis. The Lessor has
agreed to provide Keystone written notice in advance ("NOTICE") of any need to
Preempt the Transponder.
8/1/95 Muzak/Keystone (Page 2)
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
One hundred and fifty (150) or more days Notice for Preemptions of Available
Inventory will be provided to Muzak. Muzak shall not be billed for Weekly
Inventory or Additional Inventory which is preempted.
4) PAYMENT AMOUNTS FOR WEEKLY INVENTORY
- ----------------------------------------
A) Muzak agrees to pay Keystone [**] of Weekly Inventory available
and not preempted in each month of the term. Muzak shall pay by the 5th
business day of each month during the term a ("MONTHLY LEASE PAYMENT") for the
Weekly Inventory available in the month. The Monthly Lease Payment shall equal
the number of hours of Weekly Inventory in each month multiplied by [**].
Keystone shall submit an invoice to Muzak 15 days prior to the first day of each
month for the amount of the Monthly Lease Payment.
B) Should Muzak purchase Additional Inventory, the hourly charge shall be
[**] and shall be billed after each service is provided and the invoice shall
be due upon receipt of the invoice in accord with Keystone standard billing
payment policy as specified in section 3.4.1 in the attached Standard Terms and
Conditions.
5) COMPLIANCE
- --------------
Muzak, in using the time as provided by Keystone in this agreement, will fully
comply with the terms and conditions of the Lease Agreement between the Lessor
and Hughes Communications including without limitation, legal, technical and
operational requirements. The terms and conditions to which Muzak shall be
subject to will be provided as attachments to this agreement.
Muzak agrees not to initiate, nor to allow any Customer to initiate, any use of
the transponder involving more than one simultaneous signal transmission, in
either analog or digital format, without prior consultation with Keystone and
prior approval of the transmission configuration by Hughes Communications.
Keystone reserves the right to require that all transmissions to Galaxy 4
transponder 12 or any other transponder provided to be coordinated through
Keystone's specified Engineering Control Center. Any alternate access and
coordination procedure shall be approved by Hughes Communications and provided
by Keystone in writing to Muzak.
Notwithstanding anything to the contrary contained in this Section or elsewhere
in this Agreement, Muzak shall have no obligation or liability to Hughes under
such Lease Agreement. Keystone represents that necessary approvals shall be
secured from Lessor and the Lessor shall be obligated to Keystone to obtain
necessary approvals from Hughes prior to the Acceptance Date.
6) ADVANCE PAYMENT
- -------------------
Muzak will provide a deposit of [**] the ("ADVANCE PAYMENT") prior to or with
the acceptance of this agreement. The Advance Payment shall be held by Keystone
to insure payment toward Muzak payments due to Keystone which may not be
delivered as specified in this agreement. The Advance Payment shall be applied
toward the last Monthly Lease Payments and applied towards any outstanding
invoices for Additional Inventory due at the end of the term. Any amount
remaining shall be promptly retained to Muzak, no later than 15 days after the
end of the Term.
7) TERMINATION OR CANCELLATION
- -------------------------------
This agreement shall not be terminated or canceled for any reason during the
term other than either party will have the right to terminate the agreement due
to a material default by the other party.
8/1/95 Muzak/Keystone (Page 3)
<PAGE>
KEYSTONE COMMUNICATIONS CORPORATION
-----------------------------------
GENERAL TERMS AND CONDITIONS
----------------------------
1. See Definitions at the end of the Terms and Conditions
- ----------------------------------------------------------
2. APPLICATION OF TERMS AND CONDITIONS
- ---------------------------------------
These Terms and Conditions are applicable to the provision of services by the
Supplier.
3. REGULATIONS
- ---------------
3.1.2 LIMITATIONS
- ------------------
(a) The use and restoration of Satellite Transmission Service during emergency
conditions shall be in accordance with Part 64, sub-part D, Appendix A, of the
Federal Communications Commission's Rule and Regulations, which specifies the
priority system for such services.
(b) The furnishing of service under these Terms and Conditions is subject to
the availability of the necessary facilities and subject to terms and conditions
of another carrier, if the facilities of another carrier are provided through
the Supplier. At the time a proposal is made to use the facilities of another
carrier, the Supplier agrees to provide in writing to the Customer, any terms
and conditions which may be different than the terms and conditions contained in
this Agreement
3.1.3 LIABILITY
- ----------------
(a) The Liability of the Supplier arising out of the furnishing of the service,
including but not limited to mistakes, omissions, interruptions, delays, errors
or other defects or representations or use thereof, or arising out of the
failure to furnish the service, and whether caused by acts of commission or
omission, shall be limited to the extension of allowances for interruptions as
set forth in 3.4.3. The extension of such allowances for interruption shall be
the sole and exclusive remedy of the Customer and the sole and exclusive
liability of the Supplier. The Customer has the right if the Supplier fails to
furnish the service, to terminate the Agreement.
(b) Notwithstanding the provisions of the preceding subparagraph, the Supplier
shall not be liable to the Customer for any loss of or any inability to furnish
service due to acts of God, acts of government, wars, riots, strikes or other
causes beyond the Supplier's control. In such event, however, the Supplier shall
use its best efforts to restore service as soon as practicable.
(c) The Customer shall indemnify and save the Supplier harmless from any and
all claims, loss, and expenses arising out of the content of the material
broadcast. The Customer shall indemnify and save the Supplier harmless from any
and all claims, loss, and expenses for damage or injury to person or property
arising out of Customer's willful or negligent conduct.
(d) Except as specifically made herein, the Supplier makes no warranty
whatever, express or implied, and SPECIFICALLY DISCLAIMS ANY WARRANTY OR
--------------------------------------
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO THE SERVICES WHICH
- ----------------------------------------------------------------------------
WILL BE PROVIDED TO THE CUSTOMER BY THE SUPPLIER UNDER THIS AGREEMENT OR THE USE
- --------------------------------------------------------------------------------
OF THOSE SERVICES IN CONJUNCTION WITH EQUIPMENT, PROGRAMS OR OTHER MATERIAL
- ---------------------------------------------------------------------------
PROVIDED BY THE CUSTOMER.
- -------------------------
8/1//95 Muzak/Keystone (Page 4)
<PAGE>
3.2 OBLIGATIONS OF THE CUSTOMER
- --------------------------------
The service provided hereunder or any rights associated therewith may not be
assigned or transferred in any manner without the prior written consent of the
Customer or the Supplier. Such consent shall not be unreasonably withheld.
Service may be used for any lawful purpose.
3.3 OPERATING PROCEDURES
- -------------------------
3.3.1 Scheduling and Service Ordering Procedures
- -------------------------------------------------
(a) The Supplier shall provide the services described above, upon receipt of
orders by the Customer.
(b) Services are to be ordered in writing or verbally by the Customer, and upon
request Supplier will provide confirmation in writing to the Customer. This
procedure will insure the best possible accuracy and agreement concerning
inquiry or Firm Orders to be scheduled. No order for service shall be binding on
the Supplier until accepted by providing the Customer a confirmation in writing.
(c) Confirmations for service orders shall be provided within 3 days, for
services requested for the 30 day period following the request and within 7 days
after receipt of each order, for services commencing within 2 months of the date
the service is requested. If confirmation of service is not possible due to
unavailability of the service requested, or for any other reason associated with
coordination of the service, the Supplier will notify the Customer as soon as
possible or within the time periods defined in this section.
(d) The owners and operators of the Transponders and some transmission service
facilities which will be used by the Supplier to serve the Customer, limit the
extent to which their resources may be scheduled.
FIRM ORDERS
- -----------
The placement of a "Firm Order" allows the confirmation of a service, ordered by
the Customer, subject to the preemption terms specified for the service and
subject to the cancellation penalties which may be associated with the
cancellation of a Firm Order.
INQUIRY ORDERS
- --------------
(a) An "Inquiry Order" allows the Customer to check on the availability of
services and place an inquiry or reservation for an order of service prior to
converting the inquiry to a Firm Order or canceling the Inquiry Order. No
financial obligation is incurred. Inquiry Orders expire and are removed from the
reservation system 72 hours after the date service is inquired. No inquiry
orders will be taken within 30 days of the request date. For example if a
Customer calls on January 2nd, inquiries may be placed for after February 2nd
but not before February 2nd. Only Firm Orders will be accepted within 30 days of
the date service is requested.
(b) In the event a Firm Order is placed for transponder inventory reserved by
an Inquiry Order, then an attempt will be made to notify the Customer of the
conflicting requirement. Unless the Customer who holds the inquiry can be
contacted within 2 hours of the occurrence of the conflict and the Customer
converts the Inquiry Order to a Firm Order within 24 hours, the challenging Firm
Order will preempt the Inquiry Order. Regulations regarding Inquiry Orders vary
between satellite service providers but this definition must be stated and used,
as this policy must be accepted by the Supplier for certain services. The
Supplier can make no guarantee regarding the availability of any services placed
on Inquiry Order status.
8/1/95 Muzak/Keystone (Page 5)
<PAGE>
3.3.2 TRANSFER AND PREEMPTION CATEGORIES OF SERVICES
- -----------------------------------------------------
(a) The Supplier reserves the right to transfer confirmed transponder services,
to another transponder of the same type on the same satellite which shall be
compatible with Customers equipment. Any such transfer of Customer's service to
another transponder, to satisfy requirements to provide a new transponder
service (unrelated to a transponder or satellite failure) shall be made upon
thirty (30) days prior notice to the Customer. Service may be preempted by the
Supplier for Protected Service restoration.
3.4 PAYMENT ARRANGEMENTS AND CREDIT ALLOWANCES
- -----------------------------------------------
3.4.1 PAYMENT OF CHARGES
- -------------------------
The Customer is responsible for payment of all charges for services furnished to
the Customer. All charges are payable upon receipt of invoice. Interest will
be charged at an annual rate of 18% on all monthly charges not paid within 30
days of the invoice date.
3.4.2 NOTICE OF MATERIAL DEFAULT
- ---------------------------------
The Supplier or the Customer, agree to provide written notice to the other in
the case that any material default is identified. The party providing such
notice shall also allow 5 business days in the case of operational material
default and 30 days for any other material default from the date either party
received such notice, to allow the other party to cure a cause for material
default.
After written notice has been delivered and the specified time has elapsed
depending on the nature of the material default, Keystone may discontinue
providing Service without incurring any liability. This right shall apply
specifically to 1) Non-payment of any sum due the supplier, or (2) Violation of
any Term or Condition of this agreement.
3.4.3 ALLOWANCE FOR INTERRUPTIONS: LIMITATIONS OF LIABILITY
- ------------------------------------------------------------
(a) Credit allowance is made as set forth in (3.4.3.B) following, for the
portion of the service which is affected by an interruption. In the event the
Customer experiences a partial or total failure, malfunction or defect in any of
the services provided pursuant to this Agreement, the Customer shall, as a
condition to any claim for refund or recovery of damages, notify Supplier by a
telephone call.
(b) When an interruption of a video or an audio program channel occurs, for a
period of 30 seconds or more, credit is allowed in increments of 5 minutes of
interruption.
(1) Two or more interruptions occurring during any period of 5 consecutive
minutes shall be considered as one interruption.
(2) An interruption of either the audio or video portion of a video service
shall be considered an interruption of both.
(c) Any legal action arising out of or involving any partial or total
interruption in any of the services must be brought within one year of the
occurrence.
(d) THE SUPPLIER SHALL NOT BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES. THIS LIMITATION OF LIABILITY SHALL
BE APPLICABLE TO ANY CLAIMS ASSERTED BY CUSTOMER AGAINST THE SUPPLIER,
REGARDLESS OF THE LEGAL THEORY FORMING THE BASIS OF SUCH CLAIM, AND WHETHER SUCH
THEORY INVOLVES NEGLIGENCE, CONTRACTUAL LIABILITY OR OTHERWISE.
8/1/95 Muzak/Keystone (Page 6)
<PAGE>
3.5 RESPONSIBILITY OF THE SUPPLIER
- -----------------------------------
3.5.1 Unless specifically provided otherwise herein, the Supplier shall not be
responsible for installation, operation or maintenance of any downlinks,
facilities, equipment or communications systems provided by a Customer.
3.5.2 The Supplier shall not be responsible to the Customer, if changes in
service availability due to the repositioning of the Galaxy 4 satellite which in
turn would require adjustments in tuning or repositioning of the Customers
downlinks. The Supplier agrees to provide a minimum of 30 days notice to the
Customer, if changes are made in the Suppliers service operations or procedures
which will affect downlinks operated by the Customer. This provision for notice
excludes service preemption's as defined in section 3.3.2, which may occur at
anytime without notice.
4. CANCELLATION OF ORDERS
- --------------------------
(a) Firm Orders may be canceled but financial responsibility for any Firm Order
shall not be canceled. The cancellation charge shall be the full charge
applicable to the scheduled service. The same number of hours of service or less
hours service may be rescheduled only within the calendar month in which the
service has been canceled, subject to availability and the cancellation charge
shall apply as payment for this utilization. The Customer agrees to full payment
for all services ordered as Firm Orders and guarantees payment for any service
ordered and then canceled even if the Firm Order is not scheduled at another
time within the calendar period.
(b) An individual service order is defined as any continuous service period
with a specific starting time and a Firm End. In the event Customer requests
additional service periods within a twenty-four hour period and there is an
interval between them, each such service period shall constitute an individual
service order.
(c) Where Customer requests one or more substantive changes in an individual
order for service, such request constitutes cancellation of the original order
subject to the descriptions above, and the modified order will be treated as a
new individual service order. Substantive changes include changes which affect
the date or length of service order in increments of more than 15 minutes, or
type of facilities ordered, but do not include simple extensions in the length
of an existing service order.
5. TAXES
- ---------
Sales, use and all other taxes (excluding the Supplier's income taxes)
determined to be due to federal, state or local taxing jurisdictions as a result
of the provision of the services to the Customer shall be separately itemized on
the Customer's bill and paid by the Customer.
6. EVENTS OF DEFAULT AND REMEDIES
- ----------------------------------
6.1 The following shall constitute events of default:
6.1.1 The institution against either party of proceedings under any bankruptcy,
insolvency or similar legislation, or the appointment for either party (or any
of its property) of a receiver or similar officer, if such proceedings or
appointments shall not be vacated, or fully stayed, within 20 days after the
institution or occurrence thereof.
6.1.2 Either party making an assignment for the benefit of creditors, a bulk
transfer of furniture, furnishings, fixtures, equipment or inventory, or either
party's admission in writing of its inability to pay its debts generally as they
become due.
6.2 Upon the occurrence of any event of default, either party may exercise any
or all rights or remedies available to it, including, but not limited to,
termination of the services. If the
8/1/95 Muzak/Keystone (Page 7)
<PAGE>
Customer is in default, the Customer shall be obligated to pay applicable
cancellation charges as though the Customer had terminated the use of services.
6.3 In the event any action is brought by either party for the breach of, or to
enforce, this Agreement, the losing party agrees to pay the cost thereof,
including reasonable attorney's fees, costs, and expenses. Either party's
decision not to exercise any or all of its rights or remedies in the event of a
default shall not constitute a waiver of rights, either generally or with
respect to that default.
7. MISCELLANEOUS
- -----------------
7.1 This Agreement constitutes the entire Agreement between the parties and
supersedes all prior Agreements, proposals, or understandings, whether written
or oral, and no representative of the Supplier is authorized to amend the terms
hereof except as provided in the following paragraph.
7.2 No amendment or waiver of any provision of this Agreement, nor consent to
any departure by the Customer or the Supplier therefrom, shall be effective
unless the same shall be in writing and signed by authorized agents of both
parties. Only officers of the Supplier and the Customer will be authorized to
amend or waive provisions of this Agreement.
7.3 If any term or provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall not be affected thereby and
each term and provision hereof shall be valid and enforced to the fullest extent
permitted by law.
7.4 This Agreement shall be construed in accordance with and governed by the
laws of the State of Utah.
DEFINITION OF UNCOMMON TERMS
- ----------------------------
COMMUNICATIONS CARRIER: The term "communications carrier" denotes a company
- ----------------------
authorized by the Federal Communications Commission to provide communications
services to the public as a common carrier for hire.
UPLINK: The term "uplink" shall mean the ground facility which transmits
- ------
electronic communication to a satellite.
DOWNLINK: The term "downlink" shall mean a ground facility which only receives
- --------
electronic communication from a satellite.
TRANSPONDER: The term "Transponder" shall mean those components of the
- -----------
satellite installed expressly to accept, select, amplify, translate frequency
and combine communication signals transmitted from a uplink facility and to
transmit the signals to one or many downlink systems.
TOC: The term "TOC" shall mean a technical or television operating center for
- ---
the origination, routing, production, editing, and transmission of electronic
communications.
GENERAL TIME DEFINITIONS ARE AS FOLLOWS EXCEPT WHERE SUPERSEDED BY SATELLITE
----------------------------------------------------------------------------
CARRIER OR THE TERMS DEFINED ABOVE:
-----------------------------------
C-BAND PRIME TIME: Use of transponder service for the period from Monday
- -----------------
through Friday (4:00 PM ET - 2:00 AM ET), Saturday, Sunday and holidays (Noon -
2:00 AM ET).
8/1/95 Muzak/Keystone (Page 8)
<PAGE>
C-BAND NON-PRIME: Use of transponder service for the period from Monday through
- ----------------
Friday (2:00 AM ET - 4:00 PM ET), Saturday, Sunday and holidays (2:00 AM ET -
Noon).
KU-BAND PRIME TIME: Use of Ku-Band transponder service for the period from
- ------------------
Monday through Friday (8:00 AM ET - 6:00 PM).
KU-BAND NON-PRIME: Use of Ku-band transponder service for the period from
- -----------------
Monday through Friday (6:00 PM ET - 8:00 AM ET) and 24 hours each day on
Saturday and Sundays.
FIRM END: The specified scheduled ending time of a service. The Customer pays
- --------
for all services provided from the beginning of a service through the specific
Firm End, which is confirmed by the Supplier.
APPROX. END: The estimated ending time of a service which may extend 30 minutes
- -----------
from the end of a Firm End. Customers pay only for the portion of the Approx.
End period which is actually used. Both a Firm End time and an Approx. End time
must be specified is Approx. End time is scheduled. Approx. End times may not
be available on certain transponder inventory.
FULL PERIOD SERVICE: Service which is provided for 24 hours per day for a
- -------------------
period of 1 month or longer.
FIXED-TERM SCHEDULED SERVICE: Service which is provided for a period of between
- ----------------------------
1 and 12 months, for a specific number of hours of service per month, and
exceeding 20 hours per month, during the same hours each month. This service is
provided subject to availability at the time Firm Orders are placed or a change
in Firm Orders is requested. The number of hours may be changed on 90 days
notice. The schedule of hours may be changed on 30 days notice.
OCCASIONAL USE SERVICE: Any service requirement which is not Full Period or
- ----------------------
Fixed-Term Scheduled Service. All Occasional Use Service is Unprotected and
Preemptible as defined in these definitions.
PROTECTED SERVICE: The term "Protected Service" shall mean service that
- -----------------
entitles the Customer to protection from service failure through the use of
available spare components or unassigned or preemptible transponders.
UNPROTECTED PREEMPTIBLE SERVICE: The term "Unprotected Preemptible Service"
- -------------------------------
shall be defined as service that does not entitle the Customer to protection
from service failure or Preemption due to changes in service availability. This
level of service does not include the use of available spare components or
unassigned or preemptible transponders in the case of a transmission facility or
satellite transponder failure. If a protected satellite transponder on the
satellite fails, the preemption order of the communications carrier will
determine whether or not the Customer's service shall be preempted.
8/1//95 Muzak/Keystone (Page 9)
<PAGE>
If the foregoing correctly sets forth our understanding and agreement with
respect to the subject matter, please execute and return two copies of this
agreement.
Sincerely,
/s/ David W. Hansford
David W. Hansford
CC: Barry McCann, Vice President National Division
ACCEPTANCE FOR MUZAK
- --------------------
Accepted on this 8 day of August, 1995,
- --------------------------------------
By: /s/ John R. Jester
- ---------------------------------------------
John R. Jester, President
Muzak Authorized Officer
ACCEPTANCE FOR KEYSTONE COMMUNICATIONS CORPORATION
- --------------------------------------------------
Accepted on this 9 day of August 1995,
- -------------------------------------
By: /s/ Bret Leifson
- ---------------------------------------------
Bret Leifson, Chief Financial Officer
8/1//95 Muzak/Keystone (Page 10)
<PAGE>
EXHIBIT 10.28
<PAGE>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been separately
filed with the Commission.
SALES AGREEMENT AND LICENSE
This SALES AGREEMENT AND LICENSE ("Agreement") is made and entered into
this 28th day of September , 1995, by and between MAINSTREAM DATA, INC., a
------ -------------
Delaware corporation ("Mainstream"), and MUZAK LIMITED PARTNERSHIP, a Delaware
limited partnership ("Muzak").
Mainstream is in the business of manufacturing and servicing audio, data
and telecommunications equipment suitable for commercial use. Muzak wishes to
purchase certain items of equipment produced by Mainstream, and Mainstream
wishes to sell such items to Muzak, on the terms and conditions set forth
herein.
The parties therefore agree as follows:
1. Equipment.
---------
1.1 Subject to the terms and conditions set forth in this agreement,
Mainstream hereby agrees to sell to Muzak and Muzak hereby agrees to purchase
from Mainstream over a 3-year period 5,000 KU-band Digital SCPC satellite
receivers (the "Receivers").
a. The MH77 and ME77 Receivers are an addressable KU-band
Digital SCPC Satellite Receiver in a self-contained receiver chassis capable of
receiving four (4) audio channels at approximately 10 kHz, one (1) data channel
at a minimum of 9.6 Kbps and a single command and control channel.
b. The MH77-2 and ME77-2 receivers are an addressable KU-band
Digital SCPC Satellite receiver in a self contained chassis which receives and
simultaneously outputs two (2) audio channels at approximately 10 kHz, one (1)
DATA channel at a minimum of 9.6 Kbps and a single command and control channel.
c. The MH77-4 and ME77-4 receivers are an addressable KU-band
Digital SCPC Satellite receiver in a self contained chassis which receives and
<PAGE>
simultaneously outputs four (4) audio channels at approximately 10 kHz, one (1)
DATA channel at a minimum of 9.6 Kbps and a single command and control channel.
d. The receivers provided will be private labeled for Muzak.
2. License. In conjunction with its sale of the Equipment to Muzak,
-------
Mainstream hereby grants to Muzak a non-exclusive license to use in perpetuity,
in association with the Equipment, the computer software which is described in
Exhibit A attached hereto and incorporated herein by reference, as such software
- ---------
now exists and is hereafter revised, modified, and updated by Mainstream within
ten (10) years after the date of this Agreement (the "Software"). Mainstream
shall make available to Muzak all revisions, modifications, and updates of the
Software promptly after they are developed. Subject to Section 8.2, such license
shall be under the following conditions:
2.1 Muzak is allowed the use of the Software to control, operate, and
otherwise utilize the full capability of Mainstream produced equipment via a
satellite distributed data stream (and various related other equipment present
at the uplink).
2.2 Muzak agrees to not create any derivations of the Software or to
modify its content in any form unless authorized by Mainstream which
authorization will not be unreasonably withheld. Muzak is allowed to fully
utilize the Software (and its associated documentation) for use in Muzak's
operational system.
2.3 Mukaz acknowledges that the Software contains trade secrets of
Mainstream and agrees to take all necessary steps to protect the Software, as
mentioned above.
2.4 New software requirements or developments requested by Muzak
which are out of the scope of the ongoing software maintenance provided for in
this Section 2 shall be the subject of a separate negotiation between the
parties.
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
2.5 In the event that Mainstream defaults under any term or provision
of this Agreement, Mainstream, upon written demand from Muzak, shall deliver to
Muzak, without cost of any kind to Muzak, any downlink software Mainstream has
produced for downlink control and Mainstream, without any further action on its
part, shall be deemed to have assigned to Muzak all of Mainstream's rights for,
or relating to, third party produced control software.
2.6 Mainstream shall take all steps necessary to assure that downlink
control software shall be available to Muzak, without cost of any kind to Muzak,
in the event that any third party provider of such software cannot continue to
meet its obligations to Mainstream. Such steps shall include escrow storage of
source codes and all related materials and documentation necessary to produce
the current release of all such control software at any time.
3. Prices and Payment.
------------------
3.1 The prices of the Equipment shall be as follows:
<TABLE>
<CAPTION>
Model Price Per Unit
----- --------------
<S> <C> <C>
a. Digital SCPC Audio Receiver MH77 [**]
b. Digital SCPC Audio Receiver (2 Port) MH77-2 [**]
c. Digital SCPC Audio Receiver (4 Port) MH77-4 [**]
d. Digital SCPC Audio Receiver ME77 [**]
e. Digital SCPC Audio Receiver (2 Port) ME77-2 [**]
f. Digital SCPC Audio Receiver (4 Port) ME77-4 [**]
g. BPSK Modulator [**]
h. APT-X Audio/Data Encoder [**]
i. Audio NMS System [**]
</TABLE>
<PAGE>
* This fee is waived unless Muzak does not purchase a combined number of
receivers totaling 3,000 in quantity over the contract period.
3.2 Payment for the Equipment shall be made as follows:
a. The price of all items of Equipment ordered by Muzak
hereunder, shall be invoiced to Muzak of the date(s) such items of Equipment are
shipped to Muzak. Payment under such invoices shall be due to Mainstream thirty
(30) days after the invoice date.
b. In addition to the purchase price, Muzak shall pay to
Mainstream any sales taxes directly attributable to its purchases of Equipment
under this Agreement.
4. Specifications; Product Warranties.
-----------------------------------
4.1 Mainstream warrants that the Equipment and the Software will meet
and perform according to the specifications set forth in Exhibits A and B
----------------
attached hereto and incorporated herein by reference and will be delivered to
Muzak free of any latent or patent defects, whether hazardous or not.
4.2 Mainstream acknowledges and agrees that Muzak and its affiliates
and customers intend to use the Equipment and the Software for the delivery and
reception of high-quality, satellite-delivered audio and data communications on
a continuous 24-hour-per-day, 365-days-per-year basis and that Muzak is relying
on Mainstream's expertise in designing and manufacturing products for that
intended use. Mainstream expressly warrants that the Equipment and the Software
shall be fit for Muzak's purposes as stated herein.
4.3 Mainstream further warrants that it has the right to license the
Software and sell the Equipment to Muzak and that neither the Equipment nor the
<PAGE>
Software infringes (or will at any time infringe) any patent, copyright, trade
secret, or other proprietary interest or right of any person or entity.
4.4 The warranties set forth in this Agreement are in addition to and
not in lieu of any other warranties, express or implied, provided to Muzak under
law.
5. Orders; Shipments.
-----------------
5.1 The parties anticipate that, following the Initial Order, Muzak
will order a minimum of 1,500 Receivers per year (up to the total number of
Receivers ordered hereunder). The parties also anticipate that each order for
Receivers will contain a release for at least 500 units. All orders shall be
made in writing and shall be delivered to Mainstream at its address set forth in
Section 12.7 below. Notwithstanding the foregoing, Muzak shall not be obligated
at any time to order or pay for any amount of Equipment from Mainstream in the
event that (i) prior orders of Equipment or Software have not conformed to the
specifications set forth in this Agreement or have included Equipment that is
substantially defective or otherwise of a lesser quality than represented to
Muzak by Mainstream and Mainstream has failed properly to repair defective or
damaged Equipment under Article 7 or resolve any software deficiency within a
mutually agreeable time; (ii) Muzak, for any reason, cancels its direct-
broadcast-satellite program; (iii) there is, for any reason, a reduction in
Muzak's projected needs for the Equipment; or (iv) without derogating from any
other right of Muzak in such event, Mainstream is in material breach of this
Agreement.
5.2 Mainstream shall ship the Initial Order according to a forecast
schedule set forth in Exhibit C attached hereto and incorporated herein by
reference. All Equipment that is the subject of subsequent orders placed by
Muzak shall be shipped in accordance with a shipment schedule included in such
order. All shipments of Equipment shall be FOB Salt Lake City and shall be sent
to such locations and by means of such
<PAGE>
carriers as are designated by Muzak in the Order. Unless Muzak requests that
Mainstream obtain shipment-period insurance on behalf of Muzak, Muzak shall
obtain its own insurance to cover damage caused by or during shipping. Damage
resulting from shipping or otherwise occurring during the shipping period shall
be reported to Mainstream within 30 days of receipt of the damaged item, and
such damage shall be repaired by Mainstream in the manner set forth in Article 7
below; provided, however, that notwithstanding anything to the contrary in
Article 7, if such shipment-period damage was directly or indirectly caused by
Mainstream, the costs of repair of such damage and other costs incurred by Muzak
as a result of the such damage (which is limited to replacement equipment and
related shipping costs) shall be borne by Mainstream. If so requested by Muzak,
Mainstream shall file and administer on behalf of Muzak any claims against
carriers or insurers relating to shipment-period damage.
5.3 The prices set forth and referred to in Article 3 above are
inclusive of order, processing, packaging and handling costs.
6. Testing. Each item of Equipment shall be fully bench-tested by
-------
Mainstream prior to its shipment.
7. Repair Services.
---------------
7.1 Muzak (or its affiliate or customer) shall return any defective
item of Equipment to Mainstream at its address set forth in Section 12.7 below,
and Mainstream shall complete the repair or replacement of such defective item
within ten (10) business days after its receipt of such item. Mainstream shall
guarantee all such repairs for a period of three months from the date of repair.
The costs of sending a defective item to Mainstream for repair shall be borne by
Muzak (or its affiliate or customer, as determined by Muzak). The costs of
returning warranty repaired items of Equipment (including any insurance costs)
shall be borne by Mainstream.
<PAGE>
7.2 Except as provided in Section 7.1, Mainstream shall bear all
costs associated with the repair or replacement of any item of Equipment found
to be defective within twelve (12) months of the date such item was first
installed and put into service by Muzak (or its affiliate or customer). All
other repairs of defective Equipment shall be subject to Mainstream's usual and
customary repair charges.
8. Technical Assistance.
---------------------
8.1 Mainstream shall deliver to Muzak within ninety (90) days after
the date of this Agreement schematic diagrams, block diagrams, and system
descriptions of the Receivers and each other item of Equipment referred to in
this Agreement, as well as an Operations Software Manual that explains the
proper operations and use of the Software in conjunction with the Equipment as
required for maintenance, repair and operation. In addition, Mainstream shall
provide with each Receiver that it ships an Installation and Operations Manual
(the "Manual") that describes and explains the proper installation and usage of
such Receiver. Mainstream shall include in the manual such information about
the Receivers as Muzak reasonably requests but shall retain exclusive
responsibility for the contents of the Manual. Mainstream affirms and agrees
that with the exception of schematic none of the information contained in
the documents referred to in this Section 8.1 shall be deemed by it to be
proprietary in nature. All such documents shall be revised by Mainstream from
time to time as necessary to maintain their accuracy and usefulness to Muzak and
its affiliates and customers.
8.2 Without derogating from any other right of Muzak in such event,
if Mainstream is unable to complete production of the equipment ordered by Muzak
hereunder without a reasonable and acceptable remedy and/or cure to Muzak, and
Muzak is not then in breach of this Agreement, Mainstream shall, upon demand,
license Muzak (or such other person or entity as Muzak selects for such purpose)
to complete such
<PAGE>
production and immediately make available to Muzak such drawings,
specifications, software, object/source codes and such other assistance as will
permit Muzak (or such other person or entity as Muzak selects for such purposes)
promptly to complete such production.
9. Term.
----
9.1 This Agreement shall commence on the date hereof and, unless
sooner terminated as set forth in Sections 9.2 and 9.3, shall remain in effect
for three (3) years from the date hereof, provided, however, that Articles 2, 4,
7, 10, 11, and 12 shall survive said termination for a period of five (5) years.
9.2 In the event that Mainstream is in material breach of this
Agreement and has not commenced to cure such breach within thirty (30) days
after its receipt of a notice of such breach from Muzak, Muzak may terminate
this Agreement without penalty as provided for in Section 5.1 by giving 90 days
prior written notice thereof to Mainstream provided, however, that if (i) Muzak
terminates this Agreement after having placed an order for Equipment that has
not been shipped and (ii) Mainstream is not then in breach of this Agreement,
Muzak shall reimburse Mainstream for Mainstream's actual costs of parts and
components ordered, purchased, or manufactured for use in such Equipment to the
extent that such parts and components cannot otherwise be employed by
Mainstream. Mainstream shall not order, purchase, or manufacture any such parts
or components following its receipt of Muzak's 90-day notice of early
termination of this Agreement.
9.3 In the event that Muzak is in material breach of this Agreement
and has not commenced to cure such breach within thirty (30) days after its
receipt of a notice of such breach from Mainstream, Mainstream may terminate
this Agreement upon written notice to Muzak.
<PAGE>
The information below marked by [**] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
10. Indemnification; Damages. Mainstream shall indemnify Muzak and hold
-------------------------
it harmless from and against any and all losses, damages, costs and expenses,
including attorneys' fees and court costs, incurred by reason of a breach of any
of the representations, warranties, covenants, and agreements made by Mainstream
in this Agreement or under law or in any other instrument or document related to
this Agreement. Muzak shall promptly notify Mainstream of any third-party claim
threatened in writing which may give rise to Muzak's right of indemnification
hereunder. Damages payable to Muzak as a result of any such breach may include
incidental and special damages. Notwithstanding any other provision of this
Agreement to the contrary, Mainstream shall not be liable in any event for any
consequential damages of any kind arising out of or related to any defects in
the Equipment or Software or any use thereof by Muzak.
11. [**].
12. General Provisions.
------------------
12.1 This Agreement may not be assigned or delegated by a party
without the prior written consent of the other party,
which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, Muzak may assign its rights and delegate its duties hereunder to any
affiliated person or entity, any successor to its business, and any of its
lenders (including for security purposes). In the event of any delegation of a
party's duties hereunder, such party shall remain liable hereunder unless
<PAGE>
and until the other party approves the delegee and the delegee assumes the
delegating party's obligations in writing. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
12.2 This Agreement embodies the entire agreement and understanding
of the parties with respect to the subject matter hereof, supersedes all prior
oral or written agreements and understandings with respect to such subject
matter, and may not be modified except by a written instrument signed by both
parties hereto.
12.3 The captions in this Agreement are for convenience only and do
not in any way limit or amplify the provisions hereof.
12.4 This Agreement may be executed in counterparts, and all of such
counterparts together shall constitute one agreement binding on all parties
thereto, notwithstanding that all parties are not signatory to the original or
same counterpart.
12.5 If any action or proceeding is brought for the enforcement of
this Agreement, the successful or prevailing party or parties shall be entitled
to recover reasonable attorney's fees and other costs incurred in the action or
proceeding, in addition to any other relief to which it or they may be entitled.
12.6 This Agreement shall be governed by the laws of the State of
Washington, including without limitation the Uniform Commercial Code codified as
Title 62A, Revised Code of Washington.
<PAGE>
12.7 All notices hereunder shall be in writing and deemed delivered
when personally delivered or sent by certified mail, postage prepaid, return
receipt requested, to a party at its address set forth below (or at such other
address as shall hereafter be designated in writing for such purpose by such
party):
(i) If to Mainstream, at
________________________
________________________
________________________
Attention:______________
(ii) If to Muzak, at
________________________
________________________
________________________
Attention:______________
12.8 Each party hereto, within thirty (30) days after the date of
this Agreement, shall appoint an Administrator who shall be primarily
responsible for overseeing the administration of this Agreement on behalf of
such party, and shall notify the other party of the name and address of such
Administrator.
12.9 Neither party shall be liable for its failure to perform
hereunder as a result of any contingency beyond its reasonable control,
including an act of God, sun outage, fire, floor, was, sabotage, and labor
strike.
12.10 The waiver of any term or condition of this Agreement by any
party shall not be construed as a waiver of any subsequent breach or failure of
the same term or condition, or an a waiver of any other term or condition of
this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MUZAK LIMITED PARTNERSHIP MAINSTREAM DATA, INC.
By: [SIGNATURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
-------------------------- --------------------------
Title: Vice President Title: President
----------------------- -----------------------
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MUZAK LIMITED PARTNERSHIP MAINSTREAM DATA, INC.
By: [SIGNATURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
-------------------------- --------------------------
Title: Vice President Title: President
----------------------- -----------------------
<PAGE>
Exhibit 10.29
<PAGE>
AMENDMENT NO. 2 TO
MUZAK LIMITED PARTNERSHIP TEMPO
SAVINGS AND RETIREMENT PLAN
(As Amended and Restated Effective Through January 1, 1989
Including Amendments Effective Through July 1, 1994)
The Muzak Limited Partnership Tempo Savings and Retirement Plan (As Amended
and Restated Effective As Of January 1, 1989 Including Amendments Effective
Through July 1, 1994), as heretofore amended (the "Plan"), is hereby amended,
effective as of January 1, 1996, unless another date is expressly otherwise
provided below, in the following respects:
1. By deleting Section (21) of Article 2 of the Plan and inserting in
lieu thereof the following:
"(21) Entry Date. The first day of each calendar quarter; except
----------
that on and after April 1, 1996, entry Date shall mean April 1, 1996 and
the first day of each calendar month beginning thereafter."
2. By deleting Section 3.1 of the Plan and inserting in lieu thereof the
following:
"Section 3.1. Eligibility for Participation. Each eligible
------------ -----------------------------
employee who was a participant in the plan on December 31, 1988 shall
continue as a participant subject to the provisions contained herein. Each
other eligible employee shall become a participant in the plan as follows:
(i) if the eligible employee was hired prior to January 1, 1992,
he shall become a participant in the plan as of the first entry date
coincident with or next following his completion of 1,000 hours of
employment during the twelve-consecutive-month period beginning on his
date of employment or during any plan year which begins thereafter;
(ii) if the eligible employee was hired on or after January 1,
1992 he shall become a participant in the plan as of the first entry
date coincident with or next following his completion of one year of
employment; or
<PAGE>
(iii) notwithstanding the foregoing provisions of Section 3.1(i)
and (ii), with respect to an eligible employee on or after April 1,
1996 who was not a participant in the plan as of March 31, 1996, such
eligible employee shall become a participant in the plan as of the
later of (A) April 1, 1996 or (B) the first entry date coincident with
or next following the date on which he completes a 90 day period of
employment with the employer (beginning on the date on which he first
performs an hour of employment) regardless of the number of hours of
employment actually performed."
3. By deleting the second sentence of Section 4.1(b) of the Plan and
inserting in lieu thereof the following:
"An active participant may change such designation as of the first payroll
period beginning on or next following the first day of any calendar quarter
(or, effective on and after April 1, 1996, of any calendar month), but
prior to July 1, 1994 not more than twice during a plan year, by giving
written directions to his employer in the form prescribed by the committee
at least 30 days (or such shorter period as may be designated by the
committee) prior to the effective date of the change."
4. By deleting first and second sentences of Section 4.1(c) of the Plan
and inserting in lieu thereof the following:
"Any active participant may suspend his before-tax contributions as of the
first day of any payroll period beginning on or next following the first
day of any calendar quarter (or, effective on and after April 1, 1996, of
any calendar month) by giving written notice to his employer in the form
prescribed by the committee at least 30 days (or such shorter period as may
be prescribed by the committee) prior to the date on which the participant
wishes the suspension to be effective. As of the first payroll period
beginning on or next following the first day of any calendar quarter (or,
effective on and after April 1, 1996, of any calendar month) which follows
by at least three months the effective date of such suspension, the
participant may elect to resume making such contributions by filing written
notice with his employer in the form prescribed by the committee at least
30 days (or such shorter period as may be prescribed by the committee)
prior to the day on which the resumption is to be made effective."
-2-
<PAGE>
5. By deleting Section 4.2 of the Plan and inserting in lieu thereof the
following:
Section 4.2. Company Savings Contributions. Subject to the limitations
----------- -----------------------------
set forth in this Article 4, each employer shall contribute for each plan
year beginning on or after January 1, 1996 on behalf of each active
participant who is employed by such employer during such plan year an
amount equal to the sum of:
(i) a percentage, which shall not be more than 100%, of the
active participant's before-tax contributions under Section 4.1 or
after-tax contributions under Section 5.1 for each payroll period
during the plan year which do not exceed in the aggregate 3% of the
active participant's compensation while an active participant during
the payroll period, and
(ii) a percentage, which shall not be more than 50%, of the
active participant's before-tax contributions under Section 4.1 or
after-tax contributions under Section 5.1 for each payroll period
during the plan year which exceed in the aggregate 3%, but do not
exceed 6%, of the active participant's compensation while an active
participant during the payroll period.
The percentages to be applied for any plan year under each of subsection
(i) and (ii) of the preceding sentence shall be determined by.the Company
in its sole discretion, which percentages shall be uniformly applied under
subsection (i) or (ii), as the case may be, to all participants.
Any contributions pursuant to this Section 4.2 shall be delivered to
the trustee not later than the due date for (including extensions thereof)
the employer's federal income tax return for the taxable year of the
employer which ends with or within the plan year to which such contribution
is attributable."
6. By deleting Section 4.3 of the Plan and inserting in lieu thereof the
following:
"Section 4.3. Retirement Contributions. Subject to the limitations set
------------ ------------------------
forth in Section 4.7, each employer shall contribute for each plan year on
behalf of each active participant who is employed by such employer and
-3-
<PAGE>
(i) who is an active participant on the last day of such
plan year and completed 1,000 or more hours of employment during
such plan year, or
(ii) whose employment terminated during such plan year on
account of the participant's retirement after attaining age 65 or
by reason of the participant's death or total and permanent
disability (as defined in Section 8.1),
such percentage, not in excess of 3%, of the participant's
compensation as the Company may, in its sole discretion, determine.
Any contribution pursuant to this Section 4.3 shall be delivered
to the trustee not later than the due date for (including extensions
thereof) the employer's federal income tax return for the taxable year
of the employer which ends with or within the plan year to which such
contribution is attributable."
7. By deleting, effective January 1, 1995, the parenthetical phrase
in the subsection (i) of the first paragraph of Section 7.5 of the Plan and
inserting in lieu thereof the following:
"(as adjusted by the cost of living pursuant to section 415(d) of the
Code)".
8. By deleting Section 7.4 of the Plan and inserting in lieu thereof
the following:
"Section 7.4. Allocation of Contributions. Contributions made
----------- ---------------------------
pursuant to Section 4.1 and Article 5 shall be allocated to the
appropriate accounts of each participant for which each such
contribution is made as of the date on which such contributions are
delivered to the trustee. Any contributions made pursuant to Section
4.2 for a plan year shall be allocated among the appropriate accounts
for which such contribution is made as of the earlier of (i) the date
on which such contributions are delivered to the Trustee or (ii) the
last day of the plan year. Contributions made pursuant to Section 4.3
shall be allocated among the appropriate accounts for which such
contribution is made as of the last day of the plan year for which
such contribution is made."
-4-
<PAGE>
9. By deleting subsection (i) of the first sentence of Section 8.2 of the
Plan and inserting in lieu thereof the following:
"(i) the balance of his before-tax, after-tax, savings and rollover
accounts determined as of the valuation date coincident with or immediately
preceding his termination of employment (except that if a participant
terminates employment on or after April 1, 1992, the balances shall be
determined as of the valuation date coincident with or immediately
following his termination of employment), plus any contributions or
transfers made by or on his behalf under Section 4.1, 4.2, 5.1, 5.2 or 5.3
since such valuation date, and".
10. By deleting Section 8.3 (a)(1) of the Plan and inserting in lieu
thereof the following:
"(1) By payment in a lump sum; provided, however, if subsequent
-------- -------
to payment any allocation is made to the participant's account
with respect to the plan year in which termination of employment
occurs, such subsequent allocation shall be distributed within
60 days after the contribution attributable to the allocation
has been made."
IN WITNESS WHEREOF, MLP Administration Corp., as administrative general
partner of Muzak Limited Partnership, has caused this instrument to be executed
as of the _____ day of the ____________, 1996.
MUZAK LIMITED PARTNERSHIP
By: MLP Administration Corp.,
Administrative General Partner
By:_______________________________
Title
-5-
<PAGE>
AMENDMENT NO. 1 TO
MUZAK LIMITED PARTNERSHIP TEMPO
SAVINGS AND RETIREMENT PLAN
(As Amended and Restated Effective As Of January 1, 1989
Including Amendments Effective Through July 1, 1994)
The Muzak Limited Partnership Tempo Savings and Retirement Plan (As Amended
and Restated Effective As Of January 1, 1989 Including Amendments Effective
Through July 1, 1994), (the "Plan"), is hereby amended, effective as of July 1,
1994, in the following respect:
1. By deleting subsection (ii) of Section (22) of Article 2 of the Plan
and inserting in lieu thereof the following:
"(ii) on and after July 1, 1994, valuation date shall mean each day the New
York Stock Exchange is open."
IN WITNESS WHEREOF, MLP Administration Corp., as administrative general
partner of Muzak Limited Partnership, has caused this instrument to be executed
as of the 12th day of January, 1996.
---- ------- --
MUZAK LIMITED PARTNERSHIP
By: MLP Administration Corp.,
Administrative General Partner
By: /s/ John R. Jester
--------------------------------
Title
John R. Jester, President
<PAGE>
MUZAK LIMITED PARTNERSHIP
TEMPO SAVINGS AND RETIREMENT PLAN
(As Amended and Restated Effective As Of January 1, 1989
Including Amendments Effective Through July 1, 1994)
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------------------
Page
----
<S> <C> <C>
Article 1 - Title and Purpose 1
Article 2 - Definitions 1
Article 3 - Participation 7
Section 3.1. Eligibility for Participation 7
Section 3.2. Applications 7
Section 3.3. Transfer of Employment to
Affiliates 8
Article 4 - Employer Contributions 8
Section 4.1. Before-Tax Contributions 8
Section 4.2. Company Savings Contributions 13
Section 4.3. Retirement Contributions 14
Section 4.4. Limitations and Adjustments
Required to Comply with Section 401(k)(3)
of the Code 14
Section 4.5. Limitations and Adjustments
Required to Comply with Section 401(m)
of the Code 18
Section 4.6. Forfeitures from Accounts 21
Section 4.7. Limitations on Employer
Contributions 22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 4.8. Aggregation of Family
Members For Purposes of Actual
Deferral Percentage Test and Average
Contribution Percentage Test 23
Section 4.9. Multiple Use of Alternative
Limitation 24
Article 5 - Employee After-Tax and Rollover
Contributions 26
Section 5.1. Employee After-Tax Contributions 26
Section 5.2. Rollover Contributions 27
Section 5.3. Direct Transfers from Other Plans 30
Article 6 - Trust 31
Article 7 - Allocation of Trust Income and
Contributions To Participants' Accounts 31
Section 7.1. Participants Accounts and
Investment Elections 31
Section 7.2. Allocation to Participants'
Accounts of Net Income of Trust and
Fluctuation in Value of Trust Assets 36
Section 7.3. Determination of Net Worth
of an Investment Fund 37
Section 7.4. Allocation of Contributions 37
Section 7.5. Statutory Limitations on
Allocations to Accounts 37
Section 7.6. Correction of Error 40
Article 8 - Distributions, Withdrawals and Loans 40
Section 8.1. Termination of Employment Under
Circumstances Entitling Participant to
Full Distribution of His Account 40
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 8.2. Termination of Employment Under
Circumstances Resulting in Complete or
Partial Forfeiture of the Participant's
Retirement Account 41
Section 8.3. Time and Manner of Distribution
Upon Termination of Employment 42
Section 8.4. Withdrawals Prior to Termination
of Employment 45
Section 8.5. Definition of Beneficiary 48
Section 8.6. Distributions to Minor and
Disabled Distributees 50
Section 8.7. Loans to Participants 51
Section 8.8. Direct Rollover 54
Article 9 - Special Participation and Distribution
Rules Relating To Re-employment Of Terminated
Employees, Employment Affiliates And Leased
Employees 56
Section 9.1. Change of Employment Status 56
Section 9.2 Re-employment of an Eligible
Employee Whose Employment Terminated
Prior to His Becoming a Participant 57
Section 9.3. Re-employment of a Terminated
Participant; Restoration of Forfeitures 57
Section 9.4. Employment by Affiliates 58
Section 9.5. Leased Employees 59
Section 9.6. Employment by Certain Prior Employers 59
Article 10 - Administration 60
Section 10.1. The Committee 60
Section 10.2. Claims Procedure 63
Section 10.3. Procedures for Domestic
Relations Orders 65
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 10.4. Notices to Participants and
Distributees 66
Section 10.5. Notices to Employers or Committee 67
Section 10.6. Records 67
Section 10.7. Reports of Trust Fund and
Accounting to Participants 67
Article 11 - Participation By Other Employers 68
Section 11.1. Adoption of Plan 68
Section 11.2. Withdrawal from Participation 68
Section 11.3. Company as Agent for Employers 68
Article 12 - Continuance By A Successor 69
Article 13 - Miscellaneous 70
Section 13.1. Expenses 70
Section 13.2. Nonassignability 70
Section 13.3. Employment Noncontractual 72
Section 13.4. Limitation of Rights 72
Section 13.5. Merger or Consolidation with
Another Plan 72
Section 13.6. Gender and Plurals 73
Section 13.7. Qualified Profit Sharing Plan 73
Article 14 - Top-Heavy Plan Requirements 73
Section 14.1. Top-Heavy Plan Determination 73
Section 14.2. Minimum Contribution for Top-Heavy Years 75
Article 15 - Amendment, Establishment of Separate
Plan and Termination 76
Section 15.1. Amendment 76
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 15.2. Establishment of Separate Plan 76
Section 15.3. Distribution upon Termination
of the Plan 77
Section 15.4 Trust to Be Applied Exclusively
for Participants and Their Beneficiaries 79
</TABLE>
- v -
<PAGE>
MUZAK LIMITED PARTNERSHIP
TEMPO SAVINGS AND RETIREMENT PLAN
(As Amended and Restated Effective As Of January 1, 1989
Including Amendments Effective Through July 1, 1994)
ARTICLE 1
---------
TITLE AND PURPOSE
-----------------
The title of this plan shall be "Muzak Limited Partnership Tempo Savings
and Retirement Plan." The terms and conditions of the plan, as amended and
restated effective as of January 1, 1989, including amendments effective through
July 1, 1994, are set forth below and, unless otherwise specifically provided,
shall apply only to persons in the employment of the employers on or after
January 1, 1989.
ARTICLE 2
---------
DEFINITIONS
-----------
As used herein the following words and phrases shall have the following
respective meanings unless the context clearly indicates otherwise:
(1) Plan. This plan as set forth herein, as from time to time
----
amended.
(2) Company. Muzak Limited Partnership, a Delaware limited
-------
partnership, and any entity which shall succeed to the business of such
partnership and adopt the plan pursuant to Article 12.
(3) Employer. The Company and any other trade or business
--------
(whether or not incorporated) which shall, with the consent of the Company,
elect to participate in the plan in the manner described in Section 11.1
and any successor thereto which shall adopt the plan pursuant to Article
12. If any such trade or business shall withdraw from participation in the
plan pursuant
<PAGE>
to Section 11.2,or shall terminate its participation in the plan pursuant
to to Section 15.3, such trade or business shall thereupon cease to be an
employer.
(4) Affiliate. (a) A member of a controlled group of corporations
---------
(within the meaning of section 414(b) of the Code) of which an employer is
a member, (b) a trade or business (whether or not incorporated) which is
under common control (within the meaning of section 414(c) of the Code)
with an employer, (c) an organization which is a member of the same
affiliated service group (within the meaning of section 414(m) of the Code)
as an employer, or (d) any other organization deemed to be affiliated with
an employer under section 414(o) of the Code.
(5) Employee. An individual whose relationship with an employer is,
--------
under common law, that of an employee.
(6) Eligible Employee. An employee other than an employee covered by
-----------------
a collective bargaining agreement unless the terms of such collective
bargaining agreement require coverage under the plan.
(7) Participant. An eligible employee who has satisfied the
-----------
applicable requirements set forth in Section 3.1. An employee shall cease
to be a participant upon termination of employment for whatever reason
except as provided in Section 3.3.
(8) Active Participant. A participant who currently qualifies as
------------------
an eligible employee.
(9) Hours of Employment. The sum of:
-------------------
(i) In the case of an employee who is customarily employed on a
full time basis, ten hours for each day for which he is entitled to
receive compensation (including days for which he receives
compensation without rendering services such as paid holidays,
vacations, sick leave or disability leave, but not exceeding 501 hours
for any one such period).
(ii) In the case of all other employees, each hour for which an
employee is entitled to receive compensation (including hours for any
period during which he receives compensation without rendering
services such as paid holidays, vacations, sick leave or disability
leave, but not exceeding 501 hours for any one such period).
-2-
<PAGE>
(iii) In the case of all other employees, each hour (not
credited above) for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an employer (but not in
excess of 501 hours if the award or agreement pertains to a period
during which no services were rendered by the employee), such hours to
be credited to the period to which the award or agreement pertains.
The computation of hours of employment attributable to periods for
which records are inadequate shall be determined under uniform rules
adopted by the committee in accordance with Department of Labor
regulations (S)(S) 2530.200b-2(b), (c) and (f). Hours of employment
credited under subparagraphs (i) and (ii) above shall be credited to
the appropriate plan year or other applicable computation period in
accordance with Department of Labor regulations (S)(S) 2530.200b-2(b),
(c) and (f).
(10) Service. The period of an employee's employment used, if
-------
his employment terminates prior to age 65 or for any reason other than his
death or disability, to determine his vested interest in his retirement
account. An employee's service shall include each plan year during which
the employee completes 1,000 or more hours of employment.
(11) Break in Service Year. A plan year during which an employee
---------------------
has not completed more than 500 hours of employment. For purposes of
determining whether an employee has incurred a break in service year, the
employee shall be credited with hours of employment for any period during
which he (i) is in military service, provided that such military service
does not extend beyond the date on which he could, with or without
application, have been discharged and after discharge from such military
service he returns to the employ of an employer within the period
prescribed by laws relating to the re-employment rights of persons in
military service, (ii) is on an uncompensated leave of absence duly granted
by his employer, or (iii) is absent from work for any period because of (A)
the employee's pregnancy, (B) the birth of the employee's child, (C) the
placement of a child with the employee in connection with the employee's
adoption of such child or (D) the need to care for any such child for a
period beginning immediately following such birth or placement. The number
of hours to be so credited shall be determined under uniform rules adopted
by the committee in accordance with regulations, except that for purposes
of clause (iii) above, the employee shall be credited with the number of
hours of employment for
-3-
<PAGE>
which the employee would receive credit but for such absence (or, if
unknown, eight hours for each business day of such absence), (I) in the
case of an employee who would have incurred a break in service year during
the plan year in which a period of absence commenced but for the
application of such clause (iii) only for such plan year, or (II) in the
case of any other employee, only for the plan year immediately following
the plan year in which such period of absence commenced. Notwithstanding
the foregoing, no hours of employment shall be credited under clause (iii)
above unless the employee timely furnishes to the committee such
information as it may reasonably require to establish to the satisfaction
of the committee that the reason for such absence and its duration.
(12) Military Service. (a) Service on active duty, in time of
----------------
national or local emergency, in the armed forces of the United States or of
any State thereof; (b) service in the armed forces of the United States or
of any State thereof under any compulsory service law; or (c) service in
the armed forces of the United States or any of its allies in time of war
in which the United States is engaged.
(13) Beneficiary. The person or persons who shall be entitled
-----------
under Section 8.5 to receive benefits in the event of the death of a
participant.
(14) Distributee. A person entitled to receive a distribution from the
-----------
trust under Article 8.
(15) Compensation. An amount equal to (i) the earnings paid to an
------------
employee by one or more employers and properly reportable as "wages, tips,
other compensation" on Internal Revenue Service Form W-2 for a plan year
including base pay, overtime and commissions and, for purposes of Section
4.3 hereof, bonuses paid under an annual incentive bonus plan, plus (ii)
any amounts which would have been so paid and reportable but for reductions
made in the participant's compensation pursuant to a qualified cash or
deferred arrangement described in section 401(k) of the Code (including
4.1(a) hereof) or pursuant to a cafeteria plan within the meaning of
section 125 of the Code, but specifically excluding from the foregoing,
however, (iii) reimbursements or other expense allowances, fringe benefits,
moving expenses, deferred compensation, welfare benefits and other special
payments, and bonuses (other than for purposes of Section 4.3 hereof to the
extent provided above). For any plan year beginning on or after January 1,
1989, however, compensation in excess of the limitation contained in
section 401(a)(17) of the Code for such
-4-
<PAGE>
plan year shall be disregarded. In determining the compensation of an
employee for purposes of this limitation, the rules of section 414(q)(6) of
the Code (as modified by section 401(a)(17) of the Code) relating to the
aggregation of compensation of certain family members shall apply. If, as a
result of the application of such rules, the limitation of section
401(a)(17) of the Code is exceeded for any plan year, such limitation shall
be prorated among the affected family members in proportion to each such
family member's compensation as determined prior to the limitation.
(16) Regulations. Written promulgations of the Department of Labor
-----------
construing Title I of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") or the Internal Revenue Service construing the
Internal Revenue Code of 1986, as amended (the "Code").
(17) Trustee. The trustee provided for in Article 6, or any
-------
successor trustee, or if there shall be more than one trustee acting at any
time, all of such trustees collectively.
(18) Trust. The trust created by agreement between the employers and
-----
the trustee, as from time to time amended.
(19) Committee. The committee appointed by the general partner (or the
---------
board of directors, if applicable) of the Company pursuant to Section 10.1.
(20) Plan Year. The calendar year.
---------
(21) Entry Date. The first day of each calendar quarter.
----------
(22) Valuation Date. The last day of each plan year, except that (i)
--------------
on and after January 1, 1992, valuation date shall mean March 31, 1992 and
the last day of each calendar month beginning after March 31, 1992, and
(ii) on and after July 1, 1994, valuation date shall mean any day the New
York Stock Exchange is open.
(23) Effective Date. January 1, 1988 in the case of the Company and
--------------
the date chosen by any other employer which subsequently adopts the plan.
(24) Highly Compensated Employee. With respect to any plan year,
---------------------------
any employee who during the preceding plan year:
-5-
<PAGE>
(a) was at any time a 5% owner (as defined in section 416(i)(1)
of the Code) of the employer or any affiliate;
(b) received compensation (as defined in section 414(q)(7) of the
Code) from the employer and affiliates in excess of $75,000 (as
adjusted under the Code);
(c) received compensation (as defined in section 414(q)(7) of the
Code) from the employer and affiliates in excess of $50,000 (as
adjusted under the Code) and was in the top-paid 20% of employees of
the employer and affiliates ranked on the basis of compensation; or
(d) was at any time an officer who received compensation (as
defined in section 414(q)(7) of the Code) in excess of 50% of the
amount in effect under section 415(b)(1)(A) of the Code for such
plan year.
With respect to the plan year, the term "highly compensated employee" also
means (i) any employee who at any time during such plan year met the
requirements of paragraphs (b), (c), or (d) above and was among the 100
employees of the employer and affiliates who received the most compensation
for such plan year or (ii) any employee who met the requirements of
paragraph (a) above during such plan year.
For purposes of paragraph (d) above, no more than 50 employees of the
employer and affiliates (or, if lesser, the greater of three employees or
10% of employees) shall be considered officers, and if no officer satisfies
the compensation requirement of paragraph (d) for a plan year, the highest-
paid officer shall be treated as a highly compensated employee for such
plan year.
The identification of highly compensated employees under this Section 2(24)
shall be made in accordance with the provisions of section 414(q) of the
Code and the regulations thereunder and the foregoing provisions of this
Section 2(24) shall be modified in accordance with section 414(q)(12) if
the Company elects to have the provisions of such section apply.
(25) Year of Employment. The twelve-consecutive-month period
------------------
beginning on the date on which an individual first performs an hour of
employment, or any plan year beginning thereafter, during which the
individual completes at least 1,000 hours of employment.
-6-
<PAGE>
ARTICLE 3
---------
PARTICIPATION
-------------
Section 3.1. Eligibility for Participation. Each eligible employee who
------------ -----------------------------
was a participant in the plan on December 31, 1988 shall continue as a
participant subject to the provisions contained herein. Each other eligible
employee shall become a participant in the plan as follows:
(i) if the eligible employee was hired prior to January 1, 1992, he
shall become a participant in the plan as of the first entry date
coincident with or next following his completion of 1,000 hours
of employment during the twelve-consecutive-month period
beginning on his date of employment or during any plan year which
begins thereafter; or
(ii) if the eligible employee was hired on or after January 1, 1992 he
shall become a participant in the plan as of the first entry date
coincident with or next following his completion of one year of
employment.
Section 3.2. Applications. At least 30 days (or such shorter period as
------------ ------------
may be designated by the committee) prior to the first entry date as of which he
desires to commence before-tax contributions pursuant to Section 4.1(a) or to
make after-tax contributions pursuant to Section 5.1, a participant who has
satisfied the applicable service requirement of Section 3.1 may elect to have
before-tax contributions made on his behalf pursuant to Section 4.1(a) or to
make after-tax contributions pursuant to Section 5.1 by executing and delivering
to his employer an application on the form prescribed by the committee
specifying his chosen rate of before-tax or after-tax contributions or both.
Such applications shall authorize his
-7-
<PAGE>
employer to reduce the participant's compensation by the amount of such before-
tax contributions or to deduct after-tax contributions from his compensation, or
both, and shall evidence the participant's acceptance of and agreement to all
provisions of the plan.
Section 3.3. Transfer of Employment to Affiliates. If a participant shall
------------ ------------------------------------
be transferred from one employer to another or from an employer to an affiliate,
such participant shall continue to participate in the plan until an event shall
occur which would have terminated his participation had he continued in the
service of an employer until the occurrence of such event. Employment by an
affiliate shall be taken into account only to the extent set forth in Article 9.
ARTICLE 4
---------
EMPLOYER CONTRIBUTIONS
----------------------
Section 4.1. Before-Tax Contributions. (a) Election of Before-Tax
------------ ------------------------ ----------------------
Contributions. Subject to the limitations set in this Article 4, each employer
- -------------
shall contribute on behalf of each active participant who is an employee thereof
an amount equal to a whole percentage not less than 2% nor more than 14% of the
active participant's compensation as may be designated by the participant as
before-tax contributions on his application pursuant to Section 3.2.
Before-tax contributions shall commence with the first payroll period
beginning on or immediately after the entry date for which the participant's
employer has received the
-8-
<PAGE>
participant's executed application pursuant to Section 3.2. Such contributions
shall be delivered to the trustee not less frequently than monthly.
(b) Changes in the Rate of Before-Tax Contributions. Before-Tax
-----------------------------------------------
contributions at the rate designated by an active participant pursuant to
Section 4.1(a) shall continue in effect until the active participant shall have
changed such designation. An active participant may change such designation as
of the first payroll period beginning on or next following the first day of any
calendar quarter, but prior to July 1, 1994 not more than twice during a plan
year, by giving written directions to his employer in the form prescribed by the
committee at least 30 days (or such shorter period as may be designated by the
committee) prior to the effective date of the change. Any change shall be
limited to those rates described in Section 4.1(a).
(c) Suspension and Resumption of Contributions. Any active
------------------------------------------
participant may suspend his before-tax contributions as of the first day of any
payroll period beginning on or next following the first day of any calendar
quarter by giving written notice to his employer in the form prescribed by the
committee at least 30 days (or such shorter period as may be prescribed by the
committee) prior to the date on which the participant wishes the suspension to
be effective. As of the first payroll period beginning on or next following the
first day of any calendar quarter which follows by at least three months the
effective date of such suspension, the participant may elect to resume making
such contributions by filing written notice with his employer in
-9-
<PAGE>
the form prescribed by the committee at least 30 days (or such shorter period as
may be prescribed by the committee) prior to the day on which the resumption is
to be made effective. Notwithstanding the foregoing, in the event a participant
receives a hardship withdrawal under Section 8.4(b) or from any other cash or
deferred arrangement within the meaning of section 401(k) of the Code which is
part of a qualified plan maintained by the employer or an affiliate, the
participant's election for making before-tax contributions under this Section
4.1 and for making employee after-tax contributions under Section 5.1 shall be
automatically suspended on the date as of which the hardship withdrawal is made
and such termination shall continue for a period of 12 months thereafter. After
the expiration of such 12-month period, the participant may resume making
contributions in accordance with the applicable provisions of the plan.
(d) Limitation on Amount of Before-Tax Contributions. The amount of
------------------------------------------------
before-tax contributions under this Section 4.1 that may be contributed on
behalf of a participant during any calendar year shall not exceed $7,000, as
adjusted for increases in the cost of living in accordance with section
402(g)(5) of the Code. Such maximum amount for any calendar year shall be
reduced by the excess, if any, of:
(i) the amount of any elective deferrals (within the meaning of
Treasury Reg. (S) 1.402(g)-1(b)) contributed by an employer or an
affiliate during such calendar year on behalf of the participant
(A) pursuant to a salary reduction agreement under any other cash
or deferred arrangement within the meaning of section 401(k) of
the Code which is part of a qualified plan maintained by the
-10-
<PAGE>
employer or affiliate or (B) to any other plan, contract or
arrangement of the employer or affiliate described in said
regulation, over
(ii) the amount of any excess contributions for such calendar year
paid to the participant pursuant to Section 4.4 or similar
provision under any other such cash or deferred arrangement.
If the participant has received a hardship withdrawal under Section 8.4(b) or
from any other cash or deferred arrangement within the meaning of section 401(k)
of the Code which is part of a qualified plan maintained by the employer or an
affiliate, such maximum amount shall also be reduced as provided in Section
8.4(b).
In addition, each participant shall, pursuant to such rules and at such
time subsequent to any calendar year as determined by the committee but not
later than March 31st, be allowed to submit a claim in writing to the committee
specifying the amount of before-tax contributions made for such year which when
added to other plans or arrangements described in sections 401(k), 408(k) or
403(b) of the Code, will exceed the limit contained in the preceding paragraph
for the year in which such contributions were made.
(e) Return of Excess Before-Tax Contributions. In the event the
-----------------------------------------
limitation of Section 4.1(d) is exceeded for a calendar year then,
notwithstanding any other provision of the plan or law, such excess, reduced by
any excess contributions previously distributed under Section 4.4 for the
corresponding plan year, plus any income or minus any loss allocable thereto as
determined under Section 4.1(f), shall be distributed to the participant from
his account balance attributable to before-tax contributions
-11-
<PAGE>
not later than the April 15th next following the end of such calendar year.
Distribution shall be made pro rata from the investment fund subaccounts in
which the participant's before-tax account is invested at the time of
distribution unless the participant elects another method of distribution from
the investment fund subaccounts, except that distribution shall not be made from
a participant loan fund subaccount until the balances in the other investment
fund subaccounts have been distributed. A participant, however, may only receive
such a distribution during such calendar year if:
(i) the participant designates in writing that the distribution is a
distribution of an amount in excess of the limitation under
section 402(g) of the Code for the calendar year,
(ii) the distribution is made after the date on which the plan
received the excess contribution, and
(iii) the plan designates the distribution as a distribution of amounts
in excess of the limitation under section 402(g) of the Code for
the calendar year.
(f) Income on Excess Contributions. For purposes of Section 4.1(e),
------------------------------
the income or loss allocable to the excess contributions to be distributed from
a participant's account balance attributable to before-tax contributions for a
year shall be an amount equal to the total income or loss of the participant's
before-tax account for such year multiplied by a fraction, the numerator of
which is the excess contributions to be distributed from such account for such
year and the denominator of which is the participant's account balance
attributable to before-tax contributions as of the end of such year reduced by
the income allocable to such account balance for
-12-
<PAGE>
the year or increased by the loss allocable to such account balance for the
year. For years prior to January 1, 1992, certain additional income or loss
shall be allocable to excess contributions to the extent provided in the plan
prior to this amendment and restatement.
Section 4.2. Company Savings Contributions. Subject to the limitations
------------ -----------------------------
set forth in this Article 4, each employer shall contribute for each plan year
on behalf of each active participant who is employed by such employer and
(i) who is an active participant on the last day of such plan year
and completed 1,000 or more hours of employment during such plan year, or
(ii) whose employment terminated during such plan year on account of
the participant's (i) retirement after attaining age 65 or by reason of the
participant's death or total and permanent disability (as defined in
Section 8.1),
an amount equal to a percentage of the active participant's before-tax
contributions under Section 4.1 or after-tax contributions under Section 5.1
which in the aggregate do not exceed 6% of the participant's compensation while
an active participant. Such percentage shall be determined by the committee in
its sole discretion, but shall not be more than 50% of such contributions. If
the committee shall decide that a savings contribution shall be made under this
Section 4.2 for a plan year, the committee shall announce such decision prior to
January 31 of the following year.
Any contributions pursuant to this Section 4.2 shall be delivered to the
trustee not later than the due date for (including extensions thereof) the
employer's federal income tax
-13-
<PAGE>
return for the taxable year of the employer which ends with or within the plan
year to which such contribution is attributable.
Section 4.3. Retirement Contributions. Subject to the limitations set
------------ ------------------------
forth in Section 4.7, each employer shall contribute for each plan year on
behalf of each active participant who is employed by such employer and who meets
the requirements of either Section 4.2(i) or Section 4.2(ii) for such plan year,
such percentage, not in excess of 3%, of the participant's compensation as the
committee may, in its sole discretion, determine. If the committee shall decide
that a discretionary contribution under this Section 4.3 shall be made for a
plan year, the committee shall announce such decision prior to January 31 of the
following year.
Any contribution pursuant to this Section 4.3 shall be delivered to the
trustee not later than the due date for (including extensions thereof) the
employer's federal income tax return for the taxable year of the employer which
ends with or within the plan year to which such contribution is attributable.
Section 4.4. Limitations and Adjustments Required to Comply with Section
------------ -----------------------------------------------------------
401(k)(3) of the Code. (a) Limitation. Notwithstanding the provisions of
- --------------------- ----------
Sections 4.1, if the actual deferral percentage for participants who are highly
compensated employees for a plan year exceeds, or in the judgment of the
committee is likely to exceed, the greater of (i) or (ii) as follows:
(i) The actual deferral percentage for participants who are not highly
compensated employees for the plan year, multiplied by 1.25, or
-14-
<PAGE>
(ii) The actual deferral percentage for participants who are not highly
compensated employees for the plan year, multiplied by 2; provided
however, that the actual deferral percentage for participants who are
highly compensated employees for the plan year may not exceed the
actual deferral percentage for participants who are not highly
compensated employees by more than two percentage points;
then the amounts contributed, or to be contributed, under Section 4.1 on behalf
of participants who are highly compensated employees for such plan year shall be
reduced at such time and in such manner as the committee shall determine under
rules and regulations uniformly applied and consistent with the following
provisions of this Section 4.4 so that the actual deferral percentage for
participants who are highly compensated employees for such plan year does not
exceed the greater of (i) or (ii) above.
If during the plan year a participant who is a highly compensated employee
for such plan year also participated in any other plan of an employer or
affiliate which includes a cash or deferred arrangement qualifying under section
401(k) of the Code, his compensation, and contributions made pursuant to a cash
or deferred arrangement, under such other plan shall be taken into account for
purposes of applying the tests under (i) or (ii) above. If during a plan year
one or more other plans which include a cash or deferred arrangement under
section 401(k) of the Code are considered along with this plan as one plan for
purposes of section 410(b) of the Code (other than the average benefit
percentage test thereunder), all such plans shall be treated as one plan in
determining the actual deferral percentage of a group of participants under this
plan. If during the plan
-15-
<PAGE>
year a participant who is not a highly compensated employee for such plan year
had contributions made under Section 4.1 on his behalf in excess of the
limitations of Section 4.1(d) for such plan year, such excess contributions
shall not be taken into account for purposes of applying the tests under (i) or
(ii) above. In applying the provisions of this Section 4.4, the provisions of
section 4.8 relating to the aggregation of certain family members shall apply to
the extent applicable.
The provisions of this Section 4.4(a) shall be applied separately in
respect of any participants covered under separate collective bargaining
agreements.
(b) Adjustments. In order to comply with the limitation of Section
-----------
4.4(a) for any plan year, the committee, in its discretion, may reduce
contributions previously made, or adjust the amount of contributions to be made,
pursuant to the provisions of Section 4.1 for such period as may be required.
Any reductions in the amounts contributed under Section 4.1 on behalf of
participants who are highly compensated employees during such plan year shall be
made in the order of the percentage of compensation contributed under Section
4.1 on behalf of such participants beginning with the highest of such
percentages. The amount by which contributions previously made to a
participant's before-tax account during a plan year are reduced, plus any income
or minus any loss allocable thereto, shall be paid, notwithstanding any other
provision of the plan or law, to the participant not later than the last day of
the subsequent plan year. Such reductions, however, shall be reduced
-16-
<PAGE>
by the amount of any excess before-tax contributions previously distributed
under Section 4.1(e) for the calendar year corresponding to the plan year to
which such distribution relates. For purposes of this paragraph, the income or
loss allocable to such contributions to be distributed from a participant's
before-tax account for a plan year shall be determined in the manner provided
in Section 4.1(f) for determining income or loss allocable to excess
contributions under Section 4.1, and distribution of excess before-tax
contributions and income and loss allocable thereto shall be made from the
various investment fund subaccounts in the manner provided in section 4.1(e) for
distributions thereunder.
(c) Definitions. For purposes of this Section 4.4:
-----------
(i) "Actual Deferral Percentage" for a specified group of
participants for a plan year shall be the average of 100
times the result (calculated separately for each participant
in such group and rounded to four decimal places) obtained
by dividing the aggregate amounts actually contributed on
behalf of each such participant under Section 4.1 (and, to
the extent permitted under rules prescribed by the Secretary
of Treasury or otherwise under the law, the savings
contributions made pursuant to Section 4.2) during such plan
year, by the participant's compensation for such plan year;
and
(ii) "Compensation" for a plan year beginning on or after January
1, 1989 shall have the meaning determined by the committee
in accordance with section 414 of the Code and the
regulations thereunder and shall only include such
compensation for the portion of such plan year for which the
participant made or could have made before-tax
contributions.
-17-
<PAGE>
Section 4.5. Limitations and Adjustments Required to Comply with Section
------------ -----------------------------------------------------------
401(m) of the Code. (a) Limitation. Notwithstanding the provisions of Section
- ------------------ ----------
4.2 or 5.1, if the average contribution percentage for participants who are
highly compensated employees for a plan year exceeds, or in the judgment of the
committee is likely to exceed, the greater of (i) or (ii) as follows:
(i) The average contribution percentage for participants who are not
highly compensated employees for the plan year, multiplied by
1.25, or
(ii) The average contribution percentage for participants who are not
highly compensated employees for the plan year, multiplied by 2;
provided, however, that the average contribution percentage for
participants who are highly compensated employees for the plan
year may not exceed the average contribution percentage for
participants who are not highly compensated employees by more
than two percentage points;
then the amounts contributed, or to be contributed, by or on behalf of
participants who are highly compensated employees for such plan year under
Section 4.2 and Section 5.1 shall be reduced at such time and in such manner as
the committee shall determine under rules and regulations uniformly applied and
consistent with the following provisions of this Section 4.5 so that the average
contribution percentage for participants who are highly compensated employees
for such plan year does not exceed the greater of (i) or (ii) above.
If during the plan year a participant who is a highly compensated employee
for such plan year also participated in any other plan of an employer or
affiliate to which employer matching contributions or employee after-tax
contributions required to be
-18-
<PAGE>
taken into account hereunder are made, his compensation, and such contributions
made, under such other plan shall be taken into account for purposes of applying
the tests under (i) or (ii) above. If during a plan year one or more other plans
to which employer matching contributions or employee after-tax contributions
required to be taken into account hereunder are made are considered along with
this plan as one plan for purposes of section 410(b) of the Code (other than
the average benefit percentage test thereunder), all such plans shall be treated
as one plan in determining the average contribution percentage of a group of
participants under this plan. In applying the provisions of this Section 4.5,
the provisions of Section 4.8 relating to the aggregation of certain family
members shall apply to the extent applicable.
The provisions of this Section 4.5(a) shall be applied separately in
respect of any participants covered under separate collective bargaining
agreements.
(b) Adjustments. In order to comply with the limitation of Section 4.5(a)
-----------
for any plan year, the committee, in its discretion, may reduce contributions
previously made, or adjust the amount of contributions to be made, pursuant to
Section 4.2 and Section 5.1 for such period as may be required. Any reductions
in the amounts contributed on behalf of participants who are highly compensated
employees for such plan year shall be made in the order of the percentage of
compensation contributed under Section 4.2 and Section 5.1 on behalf of such
participants beginning with the highest of such percentages. In
-19-
<PAGE>
making the foregoing reductions, contributions shall be reduced in the following
order: (i) unmatched after-tax contributions, (ii) matched after-tax
contributions and related savings contributions and (iii) savings contributions
which match before-tax contributions. The amount by which contributions
previously made to a participant's account during a plan year are so reduced,
plus any income or minus any loss allocable thereto, shall be paid,
notwithstanding any other provision of the plan or law, to the participant not
later than the last day of the subsequent plan year. Notwithstanding the
provisions of Section 4.2, 5.1 or 8.2, if reductions in a participant's before-
tax contributions are paid to a participant pursuant to Section 4.1 or 4.4 or a
participant's after-tax contributions are paid to a participant pursuant to
Section 4.5, the committee shall reduce savings contributions previously made
with respect to any such contributions pursuant to Section 4.2 and such amount,
plus any income or loss allocable thereto, shall be applied to reduce the amount
of the employer's savings contributions pursuant to Section 4.2. For purposes of
this paragraph, the income or loss allocable to savings contributions or after-
tax contributions to be reduced from an account for a plan year shall be
determined in the manner provided in Section 4.1(f) for determining income or
loss allocable to excess contributions under Section 4.1, and distribution of
excess savings contributions or after-tax contributions and income allocable
thereto shall be made from the various investment fund subaccounts in the manner
provided in Section 4.1(e) for distributions thereunder.
-20-
<PAGE>
(c) Definitions. For purposes of this Section 4.5
-----------
(i) "Average Contribution Percentage" for a specified group
of participants for a plan year shall be the average of
100 times the result (calculated separately for each
participant in such group and rounded to four decimal
places) obtained by dividing the aggregate amounts
actually contributed pursuant to Section 4.2 and
Section 5.1 (and, to the extent permitted under rules
prescribed by the Secretary of Treasury or otherwise
under law, the before-tax contributions made pursuant
to Section 4.1) for the benefit of such participant for
such plan year by the participant's compensation for
such plan year; and
(ii) "Compensation" for a plan year beginning on or after
January 1, 1989 shall have the meaning determined by
the committee in accordance with section 414 of the
Code and the regulations thereunder and shall only
include such compensation for the portion of such plan
year for which the participant made or could have made
before-tax contributions.
Section 4.6. Forfeitures from Accounts. The total amount forfeited
----------- -----------
during a plan year pursuant to Section 8.2 from accounts of participants
employed by an employer, reduced by the amount, if any, of such forfeitures
which pursuant to Section 9.3 have been credited to the accounts of former
participants who have been re-employed, shall be used to reduce the
contributions of such employer under Section 4.3 or, to the extent such amount
exceeds the employer's contribution to be made for such plan year, such excess
shall be deemed a contribution under Section 4.3 for such plan year.
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<PAGE>
Section 4.7. Limitations on Employer Contributions. The aggregate
------------ -------------------------------------
contributions of an employer pursuant to Sections 4.1, 4.2 and 4.3 for any plan
year shall not exceed the maximum amount for which a deduction is allowable to
such employer for federal income tax purposes for the taxable year of such
employer which ends with or within such plan year on account of such
contribution and each contribution of an employer under the plan is expressly
conditioned upon the current deductibility of the contribution under section 404
of the Code.
Any contribution made by an employer by reason of a good faith mistake of
fact, or any contribution made by an employer which exceeds the maximum amount
for which a deduction is allowable to the employer for federal income tax
purposes, shall be returned by the trustee to such employer, and if any such
contribution was a before-tax contribution, the amount thereof shall be paid by
the employer to the participants on whose behalf such contributions were made
and included in the participants' compensation for federal income tax purposes
for the year of such payment. The return of any such contribution must be made
within one year after such contribution was mistakenly made or after the
deduction of such excess portion of such contribution was disallowed, as the
case may be. The amount to be returned to the employer pursuant to this
paragraph shall be the excess of (i) the amount contributed over (ii) the amount
that would have been contributed had there not been a mistake of fact or a
mistake in determining the maximum allowable deduction. Earnings attributable
to the mistaken contribution shall not be returned
-22-
<PAGE>
to the employer, but losses attributable thereto shall reduce the amount to be
so returned. If the return to the employer of the amount attributable to the
mistaken contribution would cause the balance of any participant's account as of
the date such amount is to be returned (determined as if such date coincided
with the close of a plan year) to be reduced to less than what would have been
the balance of such account as of such date had the mistaken amount not been
contributed, the amount to be returned to the employer shall be limited so as to
avoid such reduction.
Section 4.8. Aggregation of Family Members For Purposes of Actual Deferral
------------ -------------------------------------------------------------
Percentage Test and Average Contribution Percent Test: If during a plan year a
- -----------------------------------------------------
participant is a family member (as defined below) of another participant who is
either (i) a 5-percent owner of the employer or any affiliate or (ii) a highly
compensated employee who is one of the ten most highly compensated employees of
the employer and affiliates ranked on the basis of compensation paid during such
plan year, then the ratio to be used under Section 4.4 or 4.5 for such family
group (which shall be treated as one highly compensated employee) in determining
the actual deferral percentage and average contribution percentage,
respectively, for the participants who are highly compensated employees shall be
the ratio determined by combining the before-tax contributions or savings and
after-tax contributions, whichever is applicable, and compensation of all
members of such family group. Except to the extent provided in the preceding
sentence, contributions subject to Section 4.4 or Section 4.5 and compensation
of all members of the family group
-23-
<PAGE>
shall be disregarded in applying the limitations under Sections 4.4, 4.5 or 4.9.
For purposes of this Section 4.8, "family member" includes the spouse, lineal
ascendants and lineal descendants of the participant and the spouses of such
ascendants and descendants.
If the foregoing family aggregation rule is applicable for any plan year
and under Section 4.4, 4.5 or 4.9 it is necessary to conform to the limitation
provided thereunder for such plan year, then, in determining the contributions
made pursuant to Section 4.1 (or the contributions made pursuant to Section 4.2
or Section 5.1) of members of the family group to be reduced thereunder, the
excess contributions determined under Section 4.4, 4.5 or 4.9 with respect to
the highly compensated employee consisting of such family group shall be
allocated among the members of such family group in proportion to the
contributions made on their behalf pursuant to Section 4.1 (or Section 4.2 and
5.1).
Section 4.9. Multiple Use of Alternative Limitation: Notwithstanding the
------------ --------------------------------------
foregoing provisions of this Article 4, if, after the application of Sections
4.4 and 4.5, the sum of the actual deferral percentage and the average
contribution percentage for the group of participants who are highly compensated
employees exceeds the aggregate limit (as defined below) for a plan year, then
the contributions made for such plan year pursuant to Sections 4.1, 4.2 and 5.1
for participants who are highly compensated employees shall be reduced so that
the aggregate limit is not exceeded. Such reductions shall be made
-24-
<PAGE>
first from after-tax contributions made pursuant to Section 5.1 (but only to the
extent such contributions are not matched by savings contributions under Section
4.2), next from before-tax contributions made pursuant to Section 4.1 (but only
to the extent such contributions are not matched by savings contributions
under Section 4.2) and then in contributions made pursuant to Section 4.2.
Reductions in contributions shall be made in the manner provided in Section 4.4
or Section 4.5, whichever is applicable. The amount by which a highly
compensated employee's contributions is reduced in accordance with the foregoing
shall be treated as an excess contributions under Section 4.4 or Section 4.5,
whichever the case may be. For the purposes of this Section 4.9, the actual
deferral percentage and average contribution percentage of participants who are
highly compensated employees are determined after any reductions required for
such plan year under Sections 4.4 and 4.5.
Notwithstanding the foregoing provisions of this Section 4.9, no reduction
shall be required by this Section 4.9 for a plan year if either (i) the actual
deferral percentage of the participants who are highly compensated employees
does not exceed 1.25 multiplied by the actual deferral percentage of the
participants who are not highly compensated employees, or (b) the average
contribution percentage of participants who are highly compensated employees
does not exceed 1.25 multiplied by the average contribution percentage of the
participants who are not highly compensated employees.
-25-
<PAGE>
For purposes of this Section 4.9, the term "aggregate limit" for a plan
year means the sum of (a) 125% of the greater of (i) the actual deferral
percentage of the participants who are not highly compensated employees for the
plan year or (ii) the average contribution percentage of the participants who
are not highly compensated employees for the plan year, and (b) the lesser of
(i) 200% of, or (ii) two percentage points plus, the lesser of such actual
deferral percentage or average contribution percentage. If it would result in a
larger aggregate limit, the word "lesser" is substituted for the word "greater"
in part (a) of this paragraph, and the word "greater" is substituted for the
word "lesser" the second place it is used in subpart (b) of this paragraph.
ARTICLE 5
---------
EMPLOYEE AFTER-TAX AND ROLLOVER CONTRIBUTIONS
---------------------------------------------
Section 5.1. Employee After-Tax Contributions. Subject to the applicable
------------ --------------------------------
limitations set forth in Article 4, each active participant shall be entitled to
make periodic after-tax contributions by means of a payroll deduction each pay
period of a whole percentage which when combined with the percentage of such
participant's before-tax contributions under Section 4.1, if any, is not less
than 2% nor more than 14% of his compensation. Periodic after-tax contributions
shall commence with the first payroll ending after the first day of the month
which is at least 30 days (or such shorter period as may be designated by the
Company) after the Company has received the participant's
-26-
<PAGE>
executed application pursuant to Section 3.2 and shall be delivered to the
trustee not less frequently than monthly. Amounts contributed pursuant to this
paragraph shall be subject to the provisions regarding elections, changes and
suspensions contained in Article 4 for before-tax contributions to the same
extent as contributions made pursuant to such Article. No participant shall be
entitled or permitted to make after-tax contributions under the plan after
January 1, 1992.
Section 5.2. Rollover Contributions. (a) If an employee receives either
------------ ----------------------
before or after becoming a participant a qualified total distribution (within
the meaning of section 402(a)(5)(E)(i) of the Code) (or, effective January 1,
1993, an eligible rollover distribution within the meaning of section 402(c)(4)
of the Code) from an employees' trust described in section 401(a) of the Code
which is exempt from tax under section 501(a) of the Code (other than a trust
which forms part of a plan maintained by an entity with respect to which the
employee is a five percent owner (within the meaning of section 416(i) of the
Code) at the time such distribution is made or at any time during the five plan
years preceding the plan year in which the distribution is made), then such
employee may contribute to this plan an amount which does not exceed the amount
of such qualified total distribution or eligible rollover distribution, as the
case may be, (including the proceeds from the sale of any property received as a
part of such distribution) less the amount considered contributed to such trust
by the employee (determined by applying section 402 of the Code). If an
-27-
<PAGE>
employee receives either before or after becoming a participant a distribution
or distributions from an individual retirement account (within the meaning of
section 408 of the Code) and the amount received represents the entire amount in
such account (or, effective January 1, 1993, all or any portion of such account)
and no amount in such account is attributable to any source other than a
qualified total distribution (within the meaning of section 402(a)(5)(E)(i) of
the Code) (or, effective January 1, 1993, an eligible rollover distribution
within the meaning of section 402 (e) (4) of the Code) from an employees' trust
described in section 401(a) of the Code which is exempt from tax under section
501(a) of the Code (other than a trust which forms part of a plan maintained by
an entity with respect to which the employee was a five percent owner (within
the meaning of section 416(i) of the Code) at the time such distribution was
made or at any time during the five plan years preceding the plan year in which
the distribution was made), and any earnings on such a rollover contribution,
then such employee may contribute to this plan such distribution or
distributions.
(b) Any rollover contribution made pursuant to paragraph (a) of this
Section shall be delivered by the employee to the committee and by the committee
to the trustee on or before the 60th day after the day on which the employee
receives the distribution or on or before such later date as may be prescribed
by law (or directly to the trustee by the trustee of the other employees' trust
described in section 401(a) of the Code). Any such contribution must be
accompanied by (a) a statement of the
-28-
<PAGE>
employee that to the best of his knowledge the amount so transferred meets the
conditions specified in paragraph (a) of this Section and (b) a copy of such
documents as may have been received by the employee advising him of the amount
of and the character of such distribution. Notwithstanding the foregoing, the
committee shall not accept a Rollover Contribution if in its judgment accepting
such contribution would cause this plan to violate any provision of the Code or
regulations and shall not be required to accept such a contribution to the
extent it consists of property other than cash.
(c) Special Accounting and Distribution Rules for Rollover
--------------------------------------------- --------
Contributions. If an employee makes a rollover contribution, the committee
- -------------
shall establish and maintain, or cause to be established and maintained, for
such employee a rollover account and the employee's rollover contribution shall
be credited to such account as of the date on which such contribution is
delivered to the trustee. A rollover account shall be deemed to be an account
of a participant except for the purposes of the allocation of employer
contributions provided for in Section 7.4, the manner in which distributions are
made pursuant to Section 8.4 to a distributee and any determination under
Section 9.3 upon the re-employment of a former participant of the treatment of
any special account established on behalf of such participant. If a rollover
contribution is made by an employee prior to his becoming a participant, such
employee shall until such time as he becomes a participant be deemed to be a
participant for all purposes of the plan except for the purposes
-29-
<PAGE>
of the allocation of employer contributions provided for in Section 7.4 and any
determination of when he becomes a participant pursuant to Article 3.
Notwithstanding any other provisions of the plan to the contrary, for purposes
of the allocation pursuant to Section 7.2 for periods prior to January 1, 1992,
the balance as of the beginning of such calendar year of each such rollover
account shall be deemed to be an amount which bears the same ratio to the amount
of such rollover contribution as the number of full months during such calendar
year during which such rollover contribution was credited to such account bears
to 12.
Upon the termination of employment of an employee who has a rollover account the
employee, or in the event of the employee's death the employee's beneficiary,
shall be entitled to receive the balance of such account distributed by the
trustee pursuant to the rules contained in Section 8.3.
Section 5.3. Direct Transfers from Other Plans. Upon the written request
------------ ---------------------------------
of a participant, the committee shall direct the trustee to accept property
transferred directly from the trustee of an employee's trust described in
section 401(a) of the Code which is exempt from tax under section 501(a) of the
Code. Notwithstanding the foregoing, the committee shall not direct the trustee
to accept such a Direct Transfer Contribution if such employee's trust is part
of a plan which provides benefits for employees some or all of whom are
employees within the meaning of section 401(c)(1) of the Code or are
shareholder-employees within the meaning of section 1379(d) of the Code or if in
the
-30-
<PAGE>
committee's judgment accepting such transfer would cause this plan to violate
any provision of the Code, and the trustee shall not be required to accept any
transfer to the extent it consists of property other than cash. Any assets so
transferred shall be deemed to be a Rollover Contribution subject to the rules
of Section 5.2.
ARTICLE 6
---------
TRUST
-----
A trust shall be created by the execution of a trust agreement between the
employers and the trustee. All employer and employee contributions under the
plan shall be paid to the trustee. In addition, the trustee shall accept any
and all assets contributed or transferred under Section 5.2 or 5.3. The trustee
shall hold all monies and other property received by it. The trustee shall
invest and reinvest the same, together with the income therefrom, on behalf of
the participants collectively in accordance with the provisions of the trust
agreement.
ARTICLE 7
---------
ALLOCATION OF TRUST INCOME AND
CONTRIBUTIONS TO PARTICIPANTS' ACCOUNTS
---------------------------------------
Section 7.1. Participant Accounts and Investment Elections. (a)
------------ ---------------------------------------------
Establishment of Accounts and Subaccounts. The committee shall establish and
- -----------------------------------------
maintain, or cause to be established and maintained, separate accounts for each
participant. The accounts maintained for a participant shall consist of (i) a
before-tax account, to which shall be credited
-31-
<PAGE>
before-tax contributions, if any, made pursuant to paragraph (a) of Section 4.1,
(ii) a savings account, to which shall be credited contributions, if any, made
pursuant to Section 4.2, (iii) a retirement account, to which shall be credited
contributions under Section 4.3, (iv) an after-tax account, to which shall be
credited amounts contributed, if any, under Section 5.1, and (v) a rollover
account to which shall be credited amounts, if any, contributed or transferred
under Section 5.2 or 5.3. All such accounts shall be solely for accounting
purposes and, except as provided below, there shall be no segregation of assets
of the trust among the separate accounts or subaccounts. Each such account (i)
may be divided from time to time if the committee so determines in its sole
discretion in so many investment fund subaccounts each of which is managed by
the trustee or by an investment manager or managers, as defined in Section 3(38)
of ERISA, appointed by the committee and (ii) shall be divided to reflect any
amounts loaned to participants therefrom as hereinafter provided. Effective
January 1, 1992, however, there shall be at least two investment fund
subaccounts established under the plan, namely, a balanced fund and a money
market fund. Earnings and losses, together with any investment expenses, of each
investment fund shall be credited or debited to each subaccount, except as
provided otherwise herein. All such subaccounts shall be solely for accounting
purposes, and, except as provided below, there shall be no segregation of assets
of the trust among the separate accounts or subaccounts. Amounts loaned to a
participant as
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<PAGE>
provided in Section 8.7 shall be recorded in and considered an investment by
such participant in a separate investment fund subaccount for such participant
designated as the participant loan fund.
(b) Investment Election. If two or more investment funds are established
-------------------
in accordance with the preceding paragraph of this Section, each active
participant, as part of his application for participation prescribed by Section
3.2, shall make an investment election which shall apply to all amounts credited
to all of the participant's accounts under the plan, except that prior to
January 1, 1992, such election shall not apply to amounts credited to the
participant's retirement account. Such election shall specify that such amounts
be invested either wholly in one of the investment funds offered under the plan
or divided among two or more of such funds in 10% increments (5% increments on
and after July 1, 1994). Effective on or after January 1, 1992, if a participant
fails to make an investment election, all amounts credited to his accounts,
other than amounts invested in the participant loan fund, shall be invested in
the balanced fund.
(c) Change of Investment Election. A participant may elect to change
-----------------------------
his investment election as of the first business day of any calendar year (or,
effective on or after April 1, 1992, as of the first business day of any
calendar month and, effective on or after July 1, 1994, as of any valuation
date). A change in investment election made pursuant to this Section shall
apply to all the participants' account balances prior to such
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<PAGE>
change, to future contributions made pursuant to Articles 4 and 5 or to both, as
designated by the participant, except that prior to January 1, 1992, such change
shall not apply to the participants' retirement account or contributions
thereto. In addition, a participant may elect to change his investment election
in a similar manner as of the first business day following June 30 of any
calendar year prior to 1992, but such election shall apply only to future
contributions made pursuant to Articles 4 and 5.
A participant's change of investment election must be made in writing to
his employer at least 30 days (or such shorter period as may be specified by the
committee) prior to the date as of which the change is to be effective.
Effective on or after July 1, 1994, however, a change in investment election may
also be made by a participant through, and subject to the written rules of, a
telephone response system maintained for this purpose by the trustee or its
agent, and any change in investment election made by a participant through such
telephone response system shall be treated as a change in investment election
made under the preceding sentence. Any change in investment election shall
specify that (i) the participant's applicable account balances not invested in
the participant loan fund or (ii) future contributions thereto, or both, be
invested either wholly in one of the investment funds described in paragraph (b)
or divided among two or more of such funds in 10% increments (5% increments on
and after July 1, 1994).
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<PAGE>
Each participant as of December 31, 1991 shall file a change of investment
election before January 1, 1992 in accordance with this Section 7.1(c) to be
effective as of January 1, 1992. Such election shall apply to all the
participant's account balances prior to such change and to future contributions.
If a participant fails to file such a change of investment election, his account
balances as of December 31, 1991 shall be invested entirely in the balanced fund
effective January 1, 1992 and future contributions on or after January 1, 1992
shall also be so invested, until he changes his investment election in
accordance with this Section 7.1(c).
Each participant as of June 30, 1994 shall file a change of investment
election before July 1, 1994 in accordance with this section 7.1(c) to be
effective as of July 1, 1994. Such election shall apply to all the participant's
account balances prior to such change and to future contributions. If a
participant fails to file such a change of investment election, his account
balances as of June 30, 1994 shall be invested effective July 1, 1994 in the
investment funds with similar investment objectives to those in which his
account balances were invested as of June 30, 1994 and future contributions on
or after July 1, 1994 shall be invested in investment funds with similar
objectives to those in which he had directed future contributions in his most
recent investment election form, until he changes his investment election in
accordance with this section 7.1(c).
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<PAGE>
Notwithstanding the foregoing, effective April 1, 1992, participants'
after-tax accounts shall be invested entirely in the money market fund.
Section 7.2. Allocation to Participants' Accounts of Net Income of Trust
------------ -----------------------------------------------------------
and Fluctuation in Value of Trust Assets. As soon as practicable after each
- ----------------------------------------
valuation date the net worth of each investment fund as of such valuation date
(as defined in Section 7.3 but excluding any contributions and interest and loan
repayments paid or payable since the immediately preceding valuation date) shall
be determined. If the net worth of such fund as so determined shall be more or
less than the total of all balances credited as of such valuation date to the
subaccounts of participants who are participants as of such valuation date
(excluding any contributions and interest and loan repayments paid or payable
since the immediately preceding valuation date), the amount of any excess or
deficiency shall be prorated and credited or charged to the subaccounts of all
such participants invested in such investment fund in the proportion that the
balance of each such subaccount as of such preceding valuation date, increased,
as of any valuation date occurring prior to July 1, 1994, by one-half of the
contributions and interest and loan repayments credited to each such subaccount,
and reduced by the amount of any withdrawals and loans from each such subaccount
since the preceding valuation date (but not less than zero), bears to the total
of such balances of all such subaccounts. Following the foregoing, contributions
and interest and loan repayments made since the immediately preceding valuation
date
-36-
<PAGE>
shall be credited to the applicable investment fund subaccounts as of the date
delivered to the trustee in accordance with the participant's investment
election then in effect with respect to future contributions.
Section 7.3. Determination of Net Worth of an Investment Fund. The net
------------ ------------------------------------------------
worth of an investment fund as of any valuation date shall be the fair market
value of all assets (including any uninvested cash) held by such fund, as
determined by the trustee on the basis of such evidence and information as it
may deem pertinent and reliable, reduced by the amount of any payments pursuant
to paragraph (b) of Section 9.3 by re-employed former participants which have
not yet been credited to such participants' accounts, and (ii) any other
liabilities of such fund other than participants' accounts.
Section 7.4. Allocation of Contributions. Contributions made pursuant to
----------- ---------------------------
Section 4.1 and Article 5 shall be allocated to the appropriate accounts of each
participant for which each such contribution is made as of the date on which
such contributions are delivered to the trustee. Contributions made pursuant to
Section 4.2 and Section 4.3 shall be allocated among the appropriate accounts
for which each such contribution is made as of the last day of the plan year for
which such contribution is made.
Section 7.5. Statutory Limitations on Allocations to Accounts.
------------ ------------------------------------------------
Notwithstanding the preceding Section of this Article or another provision of
the plan, the amount allocated to a participant's account pursuant to Section
7.4 for any plan year
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<PAGE>
shall be limited so that (i) the annual additions for such plan year to the
participant's accounts in the plan and in all other defined contribution plans
maintained by his employer shall not exceed the lesser of $30,000 (or, if
greater, 25% of the defined benefit dollar limitation in effect under section
415(b)(1)(A) of the Code for the plan year) or 25% of the participant's
compensation for such plan year.
If the limitation set forth above would be exceeded by allocation of an
amount pursuant to Section 7.4, the portion of any after-tax contributions
pursuant to Article 5 which is included in the annual additions (as defined
below) for such plan year shall be refunded to the extent of such excess. If
such portion shall be less than such excess, first, the amount otherwise
allocable in respect of contributions made by such participant's employer under
Sections 4.1 shall be reduced to the extent necessary to comply with such
limitations, second, the amount otherwise allocable in respect of contributions
made by such participant's employer under Section 4.3, and third, the amount
otherwise allocable in respect of contributions made by the participant's
employer under Section 4.2 shall be reduced to the extent necessary to comply
with such limitations. To the extent the amount of such reduction is
attributable to contributions on behalf of a participant under Section 4.1, the
employer shall pay to such participant additional compensation in an amount
equal to such reduction.
-38-
<PAGE>
The "annual additions" for a plan year to a participant's account in the
plan and in any other defined contribution plan is the sum during such plan year
of
(i) the amount of employer and participant contributions allocated to such
participant's accounts determined without regard to the limitations of
Sections 4.1(d), 4.4, 4.5 and 4.9, and
(ii) the amount of forfeitures allocated to such participant's accounts;
but excluding any rollover contribution under Section 5.2 or
transfer under Section 5.3.
As used in this Section 7.5, the terms "defined contribution plan,"
"maintained by his employer" and "compensation" shall have the meaning set forth
in section 415 of the Code and the regulations thereunder, and a participant's
employer shall include all affiliates determined under sections 414(b), (c), (m)
and (o) as modified by section 415(g) of the Code.
The otherwise permissible allocations for any participant under this plan
shall be further reduced to the extent necessary, as determined by the
committee, to prevent disqualification of the plan under section 415 of the Code
(as modified by section 416 of the Code if the Plan is a "top-heavy plan" as
defined in said section 416) which imposes additional limitations on the
benefits payable to participants who also participate in a tax-qualified defined
benefit plan maintained by his employer. The extent to which the allocations
under the plan are reduced as compared with the extent to which the benefits
under any other plan shall be reduced in order to comply with the
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<PAGE>
foregoing limitations shall be determined by the committee so as to maximize the
aggregate benefits available to such participant.
Section 7.6. Correction of Error. If it shall come to the attention of
------------ -------------------
the committee that an error has been made in any of the allocations prescribed
by this Article, appropriate adjustment shall be made to the accounts of all
participants and distributees which are affected by such error, except that no
adjustment need be made with respect to any distributee whose account has been
distributed in full prior to the discovery of such error.
ARTICLE 8
---------
DISTRIBUTIONS, WITHDRAWALS AND LOANS
------------------------------------
Section 8.1. Termination of Employment Under Circumstances Entitling
------------ -------------------------------------------------------
Participant to Full Distribution of His Account. If a participant's employment
- -----------------------------------------------
shall terminate under any of the following circumstances, the participant or his
designated beneficiary, as the case may be, shall be entitled to receive the
balance of all of such participant's accounts under the plan determined as of
the valuation date coincident with or immediately preceding his termination of
employment (except that if a participant terminates employment on or after April
1, 1992, the balance shall be determined as of the valuation date coincident
with or immediately following his termination of employment), plus any
contributions or transfers made by or on his behalf under Sections 4.1, 4.2,
4.3, 5.1, 5.2 or 5.3 since such valuation date, and reduced by the unpaid
portion of all
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<PAGE>
loans made to the participant pursuant to Section 8.7 including interest accrued
thereon.
(1) After attaining age 65.
(2) Because of the participant's death.
(3) Because of total and permanent disability of a character which
prevents the participant, in the judgment of the committee corroborated in
writing by a licensed physician, from substantially performing his usual
duties for his employer.
(4) After the participant has at least 5 years of service.
Section 8.2. Termination of Employment Under Circumstances Resulting in
------------ ----------------------------------------------------------
Complete or Partial Forfeiture of the Participant's Retirement Account. If a
- ----------------------------------------------------------------------
participant's employment shall terminate under circumstances other than those
set forth in Section 8.1, he shall be entitled to receive (i) the balance of his
before-tax, after-tax, savings and rollover accounts determined as of the
valuation date coincident with or immediately preceding his termination of
employment (except that if a participant terminates employment on or after April
1, 1992, the balances shall be determined as of the valuation date coincident
with or immediately following his termination of employment), plus any
contributions or transfers made by or on his behalf under Sections 4.1, 5.1, 5.2
or 5.3 since such valuation date, and (ii) a percentage of his retirement
account balance determined as of the valuation date coincident with or
immediately preceding his termination of employment (except that if a
participant terminates employment on or after April 1, 1992, the balance shall
be determined as of the valuation date coincident with or immediately following
his termination of
-41-
<PAGE>
employment) determined by reference to the participant's years of service at the
date of termination of his employment pursuant to the following table:
<TABLE>
<CAPTION>
Years of Service Percentage
-----------------------------------------------
<S> <C>
Less than 1 0
more than 1 but less than 2 20%
more than 2 but less than 3 40%
more than 3 but less than 4 60%
more than 4 but less than 5 80%
more than 5 100%
</TABLE>
The difference between the balance of the participant's retirement account and
the amount distributable with respect to such account pursuant to the above
shall be held in the participant's account and shall be forfeited on the first
to occur of (i) the date the participant incurs five consecutive break-in-
service years or (ii) the date the participant receives a lump sum distribution
pursuant to Section 8.3 of the portion of his account to which he is entitled.
In all cases, the amount to which a participant is entitled under this Section
8.2 shall be reduced by the unpaid portion of all loans made to the participant
pursuant to Section 8.7 including interest accrued thereon.
Section 8.3. Time and Manner of Distribution Upon Termination of
------------ ---------------------------------------------------
Employment. (a) Form of Distribution. Any distribution to which a participant
- ---------- --------------------
becomes entitled upon termination of employment shall be distributed by the
trustee by whichever of the following methods the participant elects:
(1) By payment in a lump sum; provided, however, if subsequent to payment
-------- -------
any allocation is made to the participant's account with respect to
the plan year in which termination of employment occurs, such
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<PAGE>
subsequent allocation shall be distributed within 60 days after the
allocation has been made.
(2) By payment in a series of installments, equal or otherwise, over a
period not longer than 10 years; provided, however, that the aggregate
------------------
installments paid in any one plan year shall be at least equal to the
lesser of (A) the remaining balance of the distributee account at the
beginning of such plan year and (B) $300. If the balance in a
distributee's accounts is insufficient to complete the number of
installments initially contemplated, payment of installments shall
terminate upon exhaustion of the distributee's accounts. If the
participant dies after the commencement of payments pursuant to this
subparagraph (2), the remaining balance of his accounts shall continue
to be distributed at least as rapidly as under the method of
distribution used prior to the participant's death.
(b) Time of Distribution. Any distribution pursuant to any of the above
--------------------
methods shall commence at such time following the valuation date as of which the
amount distributable is determined as the participant shall elect in writing, or
as soon thereafter as is possible, but in no event later than the later of (i)
60 days after the close of the plan year in which employment terminates and (ii)
60 days after the close of the plan year in which the participant attains age
65, except that a participant may elect in writing to defer distribution to not
later than the April 1 of the calendar year following the calendar year in which
the participant attains age 70-1/2; provided, however, that in the event the
participant shall die prior to the commencement of a distribution pursuant to
any of the above methods, such distribution shall be completed not more than 5
years after the death of the participant, except that, (A) if such participant's
beneficiary is the participant's spouse such distribution may be deferred until
the date on which the
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<PAGE>
participant would have attained age 70-1/2 had he survived and (B) distribution
may be made over a period not to exceed the life expectancy of the beneficiary
if such distribution commences within one year after the participant's death.
Notwithstanding the foregoing, if the distribution is under circumstances which
may result in a partial forfeiture of the participant's accounts pursuant to
Section 8.2, payment shall be deferred until the participant incurs five
consecutive break in service years unless distribution is to be made in a lump
sum and either (i) the amount to be distributed from the participant's accounts
is not more than $3,500 or (ii) the participant requests in writing distribution
in the form of a lump sum. A participant who shall remain in employment beyond
April 1 of the year following the year in which he attains age 70-1/2 shall
nevertheless for purposes of this Section 8.3 be deemed to have terminated his
employment on such April 1, and shall commence receiving payment of his accounts
on such date. If a participant has not repaid all loans made to him under the
plan at the time of his termination, he shall be deemed to have elected to have
that portion of his account equal to the unpaid portion of said loans, including
accrued interest, distributed to him at his termination unless he is not in
default on such loan at the time of termination. If the participant is not in
default on the loan at the time of his termination or if a participant receives
a loan after his termination of employment, the unpaid portion of such loan,
including accrued interest, shall be deducted from the balance of his account to
which he is entitled and considered a
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<PAGE>
distribution from his account on the first to occur of (i) the participant's
default on repayment on the loan and (ii) the date payment of his account is
made or commences under this Section 8.3(b).
(c) Investment of Distributee Accounts. Unless the full amount of the
----------------------------------
distribution to which a participant or his beneficiary, as the case may be, is
entitled is paid by the valuation date next following the valuation date as of
which the amount distributable is determined, the undistributed amount shall
remain in the participant's accounts and shall be deemed to be a participant's
account for purposes of Section 7.2 (but not for purposes of Section 7.4) until
it is distributed in full to the distributee. On and after January 1, 1992,
such amount not distributed by the next following valuation date, to the extent
not invested in the participant loan fund, shall be invested as soon as possible
thereafter in the balanced fund, provided, however, that on and after July 1,
--------
1994, such amount shall be invested in accordance with the provisions of Section
7.1(c) and for purposes of Section 7.1(c), a former participant or beneficiary,
as the case may be, shall be deemed participant thereunder.
Section 8.4. Withdrawals Prior to Termination of Employment. (a)
------------ ----------------------------------------------
Withdrawals from After-Tax Accounts. A participant may elect to withdraw from
- -----------------------------------
his after-tax account as of the last day of any month an amount equal to not
more than the balance of his after-tax account as of such date. Prior to April
1, 1992, the amount withdrawn may not be less than $500.
-45-
<PAGE>
The election described above shall be made by giving written notice to the
committee in the form prescribed by the committee at least 30 days (or such
shorter period as the committee may determine) prior to the effective date of
such withdrawal. Any amounts so withdrawn shall be withdrawn from the
participant's investment fund subaccounts in the manner specified by the
participant.
(b) Withdrawals from Before-Tax Accounts. (i) A participant who has
------------------------------------
withdrawn (or elected to withdraw) the maximum amount permitted under paragraph
(a) of this Section may elect to withdraw amounts from his before-tax account as
of any valuation date following the participant's attainment of age 59-1/2 or
demonstration to the committee's satisfaction of financial hardship. Such
election shall be made by giving written notice to the committee in the form
prescribed by the committee at least 30 days (or such shorter period as the
committee may determine) prior to the effective date of the withdrawal. Any
amounts so withdrawn shall be withdrawn from the participant's investment fund
subaccounts in the manner specified by the participant.
(ii) A hardship withdrawal under this Section 8.4(b) shall be permitted
only if the withdrawal both (A) is made on account of an immediate and heavy
financial need of the participant and (B) is necessary to satisfy such financial
need. For purposes of this Section 8.4(b):
(1) a withdrawal will be considered to be made on account of an immediate
and heavy financial need of the participant only if it is on account of (i)
medical expenses, as described in section 213(d) of the Code, incurred by
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<PAGE>
the participant, the participant's spouse or any dependent of the
participant (as defined in section 152 of the Code), (ii) the purchase
(excluding mortgage payments) of a principal residence for the participant,
(iii) payment of tuition for the next semester or quarter of post-secondary
education for the participant, his spouse, children or dependents, or (iv)
the need to prevent the eviction of the participant from his principal
residence or foreclosure on the mortgage of the participant's principal
residence; and
(2) a withdrawal will be considered to be necessary to satisfy an
immediate and heavy financial need of the participant only if (i) the
withdrawal is not in excess of the amount of the immediate and heavy
financial need of the participant, (ii) the participant has obtained all
distributions, other than hardship distributions, and all nontaxable loans
currently available to him under the plan and all other plans maintained by
the employer or an affiliate, (iii) the participant is precluded from
making or having made on his behalf any contributions under Sections 4.1
and 5.1 or under any other cash or deferred arrangement within the meaning
of section 401(k) of the Code which is part of a qualified plan maintained
by the employer or an affiliate, or any after-tax employee contributions
(other than mandatory employee contributions to a defined benefit plan)
under any qualified or nonqualified plan of deferred compensation of the
employer or an affiliate, for a period of at least 12 months after receipt
of the withdrawal, and (iv) the maximum amount within the meaning of
section 402(g) of the Code that may be contributed on behalf of the
participant under Section 4.1 and to any other cash or deferred arrangement
within the meaning of section 401(k) of the Code which is part of a
qualified plan maintained by the employer or affiliates is reduced for the
plan year next following the plan year in which the hardship withdrawal is
received by the amount of such contributions made by or on behalf of the
participant for the plan year in which the withdrawal is received.
The determination of the existence of a financial hardship hereunder and of
the amount required to be distributed to meet the need created by the hardship
will be made by the committee and its decisions shall be applied in a
nondiscriminatory manner. The committee, in its discretion and upon
consideration of developments known to it, may further limit the amount of a
withdrawal.
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<PAGE>
(iii) The maximum amount that a participant is permitted to withdraw under
this Section 8.4(b) is the balance in his before-tax account (less all unpaid
loans made to the participant pursuant to Section 8.7, including interest
accrued thereon, from such account), except that, in the case of a hardship
withdrawal, the maximum amount that may be withdrawn shall not exceed the lesser
of the balance in his before-tax account (less all unpaid loans made to the
participant pursuant to Section 8.7, including interest accrued thereon, from
such account) and the aggregate of the participant's before-tax contributions.
Beginning on and after April 1, 1992, the amount withdrawn in a hardship
withdrawal may not be less than $1,000.
Section 8.5. Definition of Beneficiary. Each participant shall have the
------------ -------------------------
right to designate a beneficiary or beneficiaries (who may be designated
contingently or successively and who may be an entity other than a natural
person) to receive any distribution to be made under Section 8.3 upon the death
of such participant or, in the case of a participant who dies subsequent to
termination of his employment but prior to the distribution of the entire amount
to which he is entitled under the plan, any undistributed balance to which such
participant would have been entitled; provided, however, that no such
--------
designation (or change thereof) shall be effective if the participant has been
married throughout the one-year period ending on the date of the participant's
death unless such designation (or change thereof) has been consented to by the
person who was the participant's spouse during such period in
-48-
<PAGE>
writing acknowledging the effect of such consent and witnessed by a plan
representative or a notary public, or it is established to the satisfaction of a
plan representative that such consent cannot be obtained because the
participant's spouse cannot be located or because of such other circumstances as
may be prescribed in regulations. Subject to the preceding sentence, a
participant may from time to time, without the consent of any beneficiary,
change or cancel any such designation. Such designation and each change therein
shall be made in the form prescribed by the committee and shall be filed with
the committee. If (i) no beneficiary has been named by a deceased participant,
(ii) such designation is not effective pursuant to the proviso contained in the
first sentence of this section, or (iii) the designated beneficiary has
predeceased the participant, the balance of the deceased participant's accounts
shall be distributed by the trustee at the direction of the committee (a) to the
surviving spouse of such deceased participant, if any, or (b) if there shall be
no surviving spouse, to the surviving children of such deceased participant, if
any, in equal shares, or (c) if there shall be no surviving spouse or surviving
children, to the executor or administrator of the estate of such deceased
participant or (d) if no executor or administrator shall have been appointed for
the estate of such deceased participant within six months following the date of
the participant's death, in equal shares to the person or persons who would be
entitled under the intestate succession laws of the state of the participant's
domicile to receive the participant's personal
-49-
<PAGE>
estate. The marriage of a participant shall be deemed to revoke any prior
designation of a beneficiary made by him and a divorce shall be deemed to revoke
any prior designation of the participant's divorced spouse if written evidence
of such marriage or divorce shall be received by the committee before
distribution shall have been made in accordance with such designation. If
within a period of three years following the death or other termination of
employment of any participant the committee in the exercise of reasonable
diligence has been unable to locate the person or persons entitled to benefits
under this Article in respect of such participant, the rights of such person or
persons shall be forfeited and the committee shall direct the trustee to pay
such benefit or benefits to the person or persons next entitled thereto under
the succession prescribed by this Section.
Section 8.6. Distributions to Minor and Disabled Distributees. Any
------------ ------------------------------------------------
distribution under this Article which is payable to a distributee who is a minor
or to a distributee who, in the opinion of the committee, is unable to manage
his affairs by reason of illness or mental incompetency may be made to or for
the benefit of any such distributee in such of the following ways as the
committee shall direct: (a) directly to any such minor distributee if, in the
opinion of the committee, he is able to manage his affairs, (b) to the legal
representative of any such distributee, (c) to a custodian under a Uniform Gifts
to Minors Act for any such minor distributee, or (d) to some near relative of
any such distributee to be used for the latter's benefit.
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<PAGE>
Neither the committee nor the trustee shall be required to see to the
application by any third party of any distribution made to or for the benefit of
a distributee pursuant to this Section.
Section 8.7. Loans to Participants. (a) Application for Loans. Upon the
------------ --------------------- ---------------------
written application of (i) a participant or (ii) a former participant who is a
party-in-interest (as defined in section 3(14) of ERISA) and whose account has
not been distributed or commenced to be distributed, the committee, in
accordance with a uniform and non-discriminatory policy, may direct the trustee
to make a loan to such participant upon such terms as the committee shall
specify. Applications for loans must be submitted to the committee at least 30
days (or such shorter period as the committee may determine) prior to the date
the loan is to be disbursed. In making loans, the committee may consider only
those factors which would be considered in a normal commercial setting by an
entity in the business of making similar types of loans. Any loan approved by
the committee will be disbursed on such date as the committee shall direct. No
loan, however, shall be made before April 1, 1992. The loan application shall
specify the account(s) and investment fund subaccount(s) against which the loan
is to be charged. Fees to defray the cost of processing the application and
servicing the loan, as determined by the trustee from time to time, shall be
charged to the participant's account and shall be non-refundable.
(b) Limitations on Loans. No loan to any participant shall exceed the
--------------------
lesser of (i) $50,000 (reduced by the excess, if, any, of the highest
outstanding balance of all loans from all
-51-
<PAGE>
qualified plans of the employer and affiliates to the participant during the one
year period ending on the day before the date the loan is made over the
outstanding balance of loans from such plans to the participant on the date the
loan is made) or (ii) 50% of the balance in his accounts as of the most recent
valuation date for which a valuation is available, as adjusted for any
distributions, withdrawals or contributions made after such valuation date, to
which he would be entitled under Article 8 if he terminated his employment on
the date his application is made. The committee, in its discretion and upon
consideration of developments known to it, may further limit the amount of any
loan it may approve. The committee shall not approve a loan of less than $1,000
and the participant may not receive more than one loan in any calendar year. No
more than two unpaid loans shall be outstanding to the participant at any time.
(c) Interest on Loans. The committee will establish the interest rate to
-----------------
apply for the term of all loans. The interest rate for any loan shall be
commensurate with the interest rate charged by persons in the business of
lending money for loans which would be made under similar circumstances, as
determined by the committee.
(d) Repayment of Loans. Any loan to a participant shall be repaid by the
------------------
participant in such manner as the committee shall determine, subject to the
limitations of this Section 8.7(d). The committee shall require that the loan
and interest thereon be repaid in equal installments at least monthly
-52-
<PAGE>
(commencing as soon as practicable following the date the loan is disbursed),
over a period which shall not exceed (i) ten years where the proceeds of the
loan are to be applied to acquire a dwelling unit which within a reasonable time
(determined at the time the loan is made) is to be used as the principal
residence of the participant or (ii) five years for all other loans. Each
installment shall be paid by payroll deductions by the employer from the
compensation of the participant or by such other method as the committee shall
prescribe. The employer shall deposit with the trustee the sums so deducted or
paid. Any loan under the plan may be prepaid without penalty on the first day
of any month and such other dates as the committee shall prescribe. Partial
prepayments shall not be permitted.
(e) Security for Loan. Each loan to a participant shall be evidenced by a
-----------------
note, payable to the order of the trustee, for the amount of the loan including
interest thereon. Each loan shall be secured by a pledge of the borrower's
account considered an investment in the participant loan fund, which pledge
shall give the trustee a security interest in all of the participant's then
existing and thereafter acquired rights in his account considered an investment
in the participant loan fund. By accepting the loan, the participant
automatically assigns, as security for the loan, such rights in his account. In
the event the participant's employment with the employer and affiliates is
terminated for any reason prior to the repayment of the loan, the unpaid balance
plus accrued interest thereon shall be deducted from the amount of his account
balance to which he is entitled at
-53-
<PAGE>
the time distribution is made or commences or deemed made as provided in this
Article 8. If, however, a participant to whom a loan is made is having
distribution of his account deferred and he is not in default on repayment on
the loan at the time of his termination of employment or if a participant
receives a loan after his termination of employment, any unpaid balance on such
loan plus accrued interest shall be deducted from the balance of his account to
which he is entitled and considered a distribution from his account on the first
to occur of (i) the participant's default on repayment of the loan and (ii) the
date payment of his Account is made or commences under Section 8.3.
Section 8.8. Direct Rollover. Effective on and after January 1, 1993, if
------------ ---------------
a participant (which for purposes of this Section 8.8 shall include a spouse or
former spouse who is an alternate payee under a qualified domestic relations
order as defined in section 414(p) of the Code) or a beneficiary who is the
participant's surviving spouse is to receive a distribution or a withdrawal
under this Article VIII or Section 15.3 and will be receiving such distribution
or withdrawal in either a lump sum or in installments extending over a period of
less than 10 years and less than his life expectancy, he may elect to have all
of the amounts, or any portion thereof equal to $500 or more, that would
otherwise be paid to the participant or beneficiary, including the unpaid
balance of any loan that would be considered a distribution, paid directly by
the trustee to an "eligible retirement plan" (as defined below) that will accept
such rollover. Such election shall not apply, however, (i) to the
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extent a distribution or withdrawal is a minimum distribution required under
Code section 401(a)(9) or (ii) to the extent that the distribution or withdrawal
is not includible in gross income.
Upon the election of a participant or beneficiary under this Section 8.8,
the amount of the distribution or withdrawal with respect to which the election
was made shall be paid directly, by such means as the committee shall determine,
to the specified eligible retirement plan at the time it would otherwise have
been paid to the participant or beneficiary. The portion, if any, of the
distribution or withdrawal that may not be directly rolled over or which the
participant or beneficiary has elected not to be rolled over shall be made to
the participant or beneficiary as otherwise provided in the plan.
Not earlier than 90 days or later than 30 days before a distribution or
withdrawal would otherwise be made (or at such other time as is prescribed or
permitted by government regulation, ruling or announcement), the committee will
deliver or cause to be delivered to the participant or beneficiary notice of his
right to make an election under the Section 8.8. Any election must be made
within such period and shall be subject to such terms and conditions as the
committee shall prescribe, including any such terms, conditions, or limitations
required or permitted by government regulations, rulings and announcements. An
election shall be accompanied by such documentation, information and
verifications as the committee shall require regarding the eligible retirement
plan to which the direct
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rollover is to be made and to enable the trustee to properly make the direct
rollover.
For purposes of this Section 8.8, "eligible retirement plan" shall mean:
(i) an individual retirement account described in Code section 408(a);
(ii) an individual retirement annuity described in Code section 408(b)
(other than an endowment contract);
(iii) with respect to a participant, a defined contribution plan qualified
under Code section 401(a); or
(iv) with respect to a participant, an annuity plan described in Code
section 403(a).
ARTICLE 9
---------
SPECIAL PARTICIPATION AND
DISTRIBUTION RULES RELATING TO
RE-EMPLOYMENT OF TERMINATED EMPLOYEES,
EMPLOYMENT AFFILIATES AND LEASED EMPLOYEES
------------------------------------------
Section 9.1. Change of Employment Status. If a person who is not a
------------ ---------------------------
participant shall become an eligible employee because of a change in his
employment status, such person shall become a participant as of the date of such
change if he had satisfied the applicable eligibility service requirement set
forth in Article 3; otherwise he shall become a participant as of the first
entry date following satisfaction of such service requirement.
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Section 9.2. Re-employment of an Eligible Employee Whose Employment
------------ ------------------------------------------------------
Terminated Prior to His Becoming a participant. (a) If an eligible employee
- -----------------------------------------------
whose employment was terminated before he had satisfied the applicable
eligibility service requirement set forth in Article 3 is re-employed by an
employer, he shall be treated as a new employee and his prior employment by an
employer shall be disregarded unless such re-employment occurs before the
employee has incurred five consecutive break in service years.
(b) If an eligible employee whose employment was terminated after he had
satisfied the applicable eligibility service requirement set forth in Article 3
and prior to his becoming a participant is re-employed by an employer, he shall
not be required to satisfy again such requirement and shall become a participant
on the date of his re-employment.
Section 9.3. Re-employment of a Terminated participant; Restoration of
------------ ---------------------------------------------------------
Forfeitures. (a) If a terminated participant is re-employed, he shall not be
- -----------
required to satisfy again the eligibility service requirement set forth in
Article 3 and shall become a participant as of the date of his re-employment.
(b) If a terminated participant is re-employed prior to incurring five
consecutive break in service years, thereafter completes a year of service
before incurring five consecutive break in service years, and at his termination
of employment the participant was not entitled to a portion of his account
pursuant to Section 8.2, but such participant did not receive a lump-sum
distribution pursuant to Section 8.3, the vested percentage in
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his account shall remain unchanged. If, however, upon his termination of
employment any such participant received a lump-sum distribution pursuant to
Section 8.3, then he shall have the right to pay an amount equal to such
distribution to the trustee. If the participant makes such a payment, then an
amount equal to the portion of his account which was forfeited pursuant to
Section 8.2 shall be credited, along with such payment, to his account as a
participant as of the close of the valuation date next following the date such
payment is made, but after making the allocations required by Section 7.2 for
such valuation date. Any such payment must be made by the close of the plan year
in which he incurs five consecutive break in service years. If pursuant to this
paragraph the forfeited portion of a participant's account is to be restored,
the amount to be so restored shall be obtained from the total amount which shall
have been forfeited pursuant to Section 8.2 during the plan year in which such
participant makes the payment set forth above, from the accounts of participants
employed by the same employer as the re-employed participant. If the aggregate
amount to be so restored to the accounts of participants employed by a
particular employer exceeds the amount of such forfeitures, such employer shall
make a contribution in an amount equal to such excess. Any such contribution
shall be made without regard to whether or not the limitations set forth in
Section 4.7 will be exceeded by such contribution.
Section 9.4. Employment by Affiliates. If a person is employed by an
------------ ------------------------
affiliate, then any period of such employment
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shall be taken into account for the purpose of determining whether and when such
person is eligible to participate in the plan under Section 3.1, and determining
when such person is entitled to receive the payment of benefits upon termination
of employment under Article 8, to the same extent it would have been had such
period of employment been with an employer.
Section 9.5. Leased Employees. If a person who performed services as a
------------ ----------------
leased employee (within the meaning of section 414(n)(2) of the Code) of any
employer or an affiliate becomes an employee, or if an employee becomes such a
leased employee, then any period during which such services were so performed
shall be taken into account for the purposes of determining whether and when
such person is eligible to participate in the plan under Section 3.1, and
determining when such person is entitled to receive the payment of benefits upon
termination of employment under Article 8, to the same extent it would have been
had such service been employment as an employee who is not an eligible employee.
This section shall not apply to any period of service during which such a leased
employee was covered by a plan described in Section 414(n)(5) of the Code.
Section 9.6. Employment by Certain Prior Employers. If a person employed
------------ -------------------------------------
by Comcast Sound Communications, Inc. ("Comcast") or an affiliate thereof
becomes an employee as of February 1, 1994 in connection with the acquisition by
the Company of substantially all of the assets of Comcast, then any period of
employment with Comcast or any affiliate thereof shall be taken into account for
purposes of determining whether and
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when such person is eligible to participate in the plan in accordance with
Section 3.1(ii) and for purposes of determining the percentage of his retirement
account balance, if any, to which he may be entitled under Section 8.2, to the
same extent had such period of employment been with an employer, except that (i)
no such employee shall become a participant in accordance with Section 3.1(ii)
prior to February 1, 1994 and (ii) the provisions of this Section 9.6 shall not
apply to any such employee hired by the Company only for transition purposes.
ARTICLE 10
----------
ADMINISTRATION
--------------
Section 10.1. The Committee. (a) The general partner (or board of
------------- -------------
directors, if applicable) of the Company shall appoint a committee consisting of
an odd number of members which shall be known as the Savings and Retirement Plan
Committee. The committee shall be the "administrator" of the plan and a "named
fiduciary" within the meaning of such terms as used in ERISA. The committee
shall be responsible, except for duties specifically vested in the trustee, for
the administration of the provisions of the plan. The general partner (or board
of directors, if applicable) of the Company shall have the right at any time,
with or without cause, to remove any member or members of the committee. A
member of the committee may resign and his resignation shall be effective upon
delivery of his written resignation to the Company. Upon the resignation,
removal or failure or inability for any reason of any member of the
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committee to act hereunder, the general partner (or board of directors, if
applicable) of the Company shall appoint a successor member. All successor
members of the committee shall have all the rights, privileges and duties of
their predecessors, but shall not be held accountable for the acts of their
predecessors.
(b) No member of the committee who is a participant shall take part in
any action of the committee or any matter involving solely his rights under the
plan.
(c) Promptly after the appointment of the original members of the
committee and from time to time thereafter, promptly after the appointment of
any successor member of the committee, the trustee shall be notified as to the
names of the persons appointed as members or successor members of the committee
by delivery to the trustee of a certified copy of the resolution of the general
partner (or board of directors, if applicable) of the Company making such
appointment.
(d) The committee shall have the duty and authority to interpret and
construe the plan in regard to all questions of eligibility, the status and
rights of participants, distributees and other persons under the plan, and the
manner, time, and amount of payment of any distributions or loans under the
plan.
(e) Each employer shall, from time to time, upon request of the
committee, furnish to the committee such data and information as the committee
shall require in the performance of its duties.
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(f) The committee shall direct the trustee to make payments of amounts
to be distributed or loaned from the trust under Article 8.
(g) The committee shall supervise the collection of participants'
contributions and the delivery of such amounts to the trustees.
(h) The members of the committee may allocate their responsibilities
among themselves and may designate any person, partnership or corporation to
carry out any of their responsibilities. Any such allocation or designation
shall be reduced to writing and such writing shall be kept with the records of
the meetings of the committee.
(i) The committee may act at a meeting, or by writing without a
meeting, by the vote or written assent of a majority of its members. The
committee shall elect one of its members as Chairman. The Chairman shall be the
plan's agent for service of legal process, keep records of all meetings of the
committee, and forward all necessary communications to the trustee. The
committee may adopt such rules and procedures as it deems desirable for the
conduct of its affairs and the administration of the plan, provided that any
such rules and procedures shall be consistent with the provisions of the plan
and ERISA.
(j) The members of the committee, and each of them, shall discharge
their duties with respect to the plan (i) solely in the interest of the
participants and beneficiaries, (ii) for the exclusive purpose of providing
benefits to employees participating in the plan and their beneficiaries and of
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defraying reasonable expenses of administering the plan and (iii) with the care,
skill, prudence, and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like aims. The
employers and the general partner of the Company hereby jointly and severally
indemnify the members of the committee, and each of them, from the effects and
consequences of their acts, omissions and conduct in their official capacity,
except to the extent that such effects and consequences shall result from their
own willful misconduct.
(k) No member of the committee shall receive any compensation or fee
for his services, unless otherwise agreed between such member of the committee
and the employers, but the necessary expenditures incurred in the discharge of
their duties as committee members shall be paid as provided in Section 13.1.
(l) The committee may employ such counsel (who may be of counsel for
any employer) and agents and may arrange for such clerical and other services as
it may require in carrying out the provision of the plan.
Section 10.2. Claims Procedure. If any participant or distributee
------------ ----------------
believes he is entitled to benefits in an amount greater than those which he is
receiving or has received, he may file a claim with the Chairman of the
committee. Such a claim shall be in writing and state the nature of the claim,
the facts supporting the claim, the amount claimed, and the address of the
claimant. The Chairman of the committee shall review the claim
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and, unless special circumstances require an extension of time, within 90 days
after receipt of the claim, give written notice by registered or certified mail
to the claimant of his decision with respect to the claim. If special
circumstances require an extension of time, the claimant shall be so advised in
writing within the initial 90-day period and in no event shall such an extension
exceed 90 days. The notice of the Chairman's decision with respect to the claim
shall be written in a manner calculated to be understood by the claimant and, if
the claim is wholly or partially denied, set forth the specific reasons for the
denial, specific references to the pertinent plan provisions on which the denial
is based, a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such material or
information is necessary, and an explanation of the claim review procedure under
the plan. The Chairman shall also advise the claimant that he or his duly
authorized representative may request a review by the full committee of the
denial by filing with the Chairman of the committee, within 65 days after notice
of the denial has been received by the claimant, a written request for such
review. The claimant shall be informed that he may have reasonable access to
pertinent documents and submit comments in writing to the committee within the
same 65-day period. If a request is so filed, review of the denial shall be made
by the full committee within, unless special circumstances require an extension
of time, 60 days after receipt of such request, and the claimant shall be given
written notice of the final decision. If special
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circumstances require an extension of time, the claimant shall be so advised in
writing within the initial 60-day period and in no event shall such an extension
exceed 60 days. The notice of the final decision shall include specific reasons
for the decision and specific references to the pertinent plan provisions on
which the decision is based and shall be written in a manner calculated to be
understood by the claimant.
Section 10.3. Procedures for Domestic Relations Orders. If the committee
------------- ----------------------------------------
shall receive any judgment, decree or order (including approval of a property
settlement agreement) pursuant to State domestic relations or community property
law relating to the provision of child support, alimony or marital property
rights of a spouse, former spouse, child or other dependent of a participant and
purporting to provide for the payment of all or a portion of the balance of the
participant's accounts to or on behalf of one or more of such persons (such
judgment, decree or order being hereinafter called a "domestic relations
order"), the Chairman of the committee shall promptly notify the participant and
each other payee specified in such domestic relations order of its receipt and
of the following procedures. After receipt of a domestic relations order, the
Chairman of the committee shall determine whether such order constitutes a
"qualified domestic relations order" as defined in paragraph (b) of Section 13.2
and shall notify the participant and each other payee named in such order in
writing of its determination. Such notice shall be written in a manner
calculated to be understood by the parties and shall set forth specific reasons
for the Chairman's
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determination, and shall contain an explanation of the review procedure under
the plan. The Chairman shall also advise each party that he or his duly
authorized representative may request a review by the full committee of the
Chairman's determination by filing with the committee a written request for such
review. The Chairman of the committee shall give each party affected by such
request notice of such request for review. Each party also shall be informed
that he may have reasonable access to pertinent documents and submit comments in
writing to the committee in connection with such request for review. Each party
shall be given written notice of the committee's final determination, which
notice shall be written in a manner intended to be understood by the parties and
shall include specific reasons for such final determination. Prior to the
issuance of regulations, the committee shall establish the time periods in which
the Chairman's determination, a request for review thereof and the review by the
full committee shall be made, provided that the total of such time periods shall
not be longer than 18 months from the date a domestic relations order is
received by the committee.
Section 10.4. Notices to Participants and Distributees. All notices,
------------- ----------------------------------------
reports and statements given, made, delivered or transmitted to a participant or
distributee shall be deemed to have been duly given, made or transmitted when
mailed by first class mail with postage prepaid and addressed to the participant
or distributee at the address last appearing on the records of the committee. A
participant or distributee may record any
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change of his address from time to time by written notice filed with the
committee.
Section 10.5. Notices to Employers or Committee. Written directions,
------------- ---------------------------------
notices and other communications from participants or distributees to the
employers or the committee shall be deemed to have been duly given, made or
transmitted either when delivered to such location as shall be specified upon
the forms prescribed by the committee for the giving of such directions, notices
and other communications, or when mailed by first class mail with postage
prepaid and addressed to the addressee at the address specified upon such forms.
Section 10.6. Records. The committee shall keep a record of all of its
------------- -------
proceedings and shall keep or cause to be kept all books of account, records and
other data as may be necessary or advisable in its judgment for the
administration of the plan.
Section 10.7. Reports of Trust Fund and Accounting to Participants. The
------------- ----------------------------------------------------
committee shall keep on file, in such form as it shall deem convenient and
proper, all reports concerning the trust fund received by it from the trustee.
The committee shall, as soon as possible after the close of each plan year
(after January 1, 1992, after the close of each calendar quarter), advise each
participant and distributee of the balances credited to his accounts as of the
close of such plan year (or a calendar quarter) pursuant to Article 7 hereof.
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ARTICLE 11
----------
PARTICIPATION BY OTHER EMPLOYERS
--------------------------------
Section 11.1. Adoption of Plan. With the consent of the Company, any trade
------------- ----------------
or business (whether or not incorporated) may become a participating employer
under the plan by (a) taking such action as shall be necessary to adopt the
plan, (b) filing with the committee a duly certified copy of the plan as adopted
by such corporation or limited partnership, (c) becoming a party to the trust
agreement establishing the trust fund, and (d) executing and delivering such
instruments and taking such other action as may be necessary or desirable to put
the plan into effect with respect to such corporation or limited partnership.
Section 11.2. Withdrawal from Participation. Any employer may, with the
------------- -----------------------------
consent of the Company, withdraw from participation in the plan at any time by
filing with the committee a duly certified copy of a resolution of its board of
directors or general partner, as the case may be, to that effect and giving
notice of its intended withdrawal to the committee, the other employers and the
trustee prior to the effective date of withdrawal.
Section 11.3. Company as Agent for Employers. Each corporation or limited
------------- ------------------------------
partnership which shall become a participating employer pursuant to Section 11.1
or Article 12 by so doing shall be deemed to have appointed the Company its
agent to exercise on its behalf all of the powers and authorities hereby
conferred upon the Company by the terms of the plan,
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including, but not by way of limitation, the power to amend and terminate the
plan. The authority of the Company to act as such agent shall continue unless
and until the portion of the trust fund held for the benefit of employees of the
particular employer and their beneficiaries is set aside in a separate trust as
provided in Section 15.2.
ARTICLE 12
----------
CONTINUANCE BY A SUCCESSOR
--------------------------
In the event that any employer shall be reorganized by way of merger,
consolidation, transfer of assets or otherwise, so that corporation, partnership
or person other than an employer shall succeed to all or substantially all of
such employer's business, such successor may be substituted for such employer
under the plan by adopting the plan and becoming a party to the trust agreement.
Contributions by such employer shall be automatically suspended from the
effective date of any such reorganization until the date upon which the
substitution of such successor for the employer under the plan becomes
effective. If, within 90 days following the effective date of any such
reorganization, such successor shall not have elected to become a party to the
plan, or if the employer shall adopt a plan of complete liquidation other than
in connection with a reorganization, the plan shall be automatically terminated
with respect to employees of such employer as of the close of business on the
90th day following the effective date of such reorganization or as of the close
of business on the date of adoption of such plan of complete liquidation, as the
case may
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be, and the committee shall direct the trustee to distribute the portion of the
trust applicable to such employer in the manner provided in section 15.3.
ARTICLE 13
----------
MISCELLANEOUS
-------------
Section 13.1. Expenses. All costs and expenses incurred in administering
------------- --------
the plan and the trust fund, including the expenses of the committee, the fees
of counsel and any agents for the committee, the fees and expenses of the
trustee, the fees of counsel for the trustee and other administrative expenses
shall be paid by the trust except to the extent paid by the employers in the
proportions determined by the Company.
Section 13.2. Nonassignability. (a) It is a condition of the plan, and
------------- ----------------
all rights of each participant and distributee shall be subject thereto, that no
right or interest of any participant or distributee in the plan shall be
assignable or transferable in whole or in part, either directly or by operation
of law or otherwise, including, but not by way of limitation, execution, levy,
garnishment, attachment, pledge or bankruptcy, but excluding devolution by death
or mental incompetency, and no right or interest of any participant or
distributee in the plan shall be liable for, or subject to, any obligation or
liability of such participant or distributee, including claims for alimony or
the support of any spouse, except as provided in paragraph (b) below.
(b) (i) Notwithstanding any provision of the plan to the contrary, if
a participant's interest in the plan, or any
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portion thereof, shall be the subject of one or more qualified domestic
relations orders, as defined below, such interest or portion thereof shall be
paid to the alternate payee at the time and in the manner specified in any such
order. For purposes of this paragraph (b), "qualified domestic relations order"
shall mean any "domestic relations order" as defined in Section 10.3 which
creates (or recognizes the existence of) or assigns to a person other than the
participant (an "alternate payee") rights to all or a portion of the
participant's interest in the plan, and:
(A) clearly specifies
(i) the name and last known mailing address (if any) of the
participant and each alternate payee covered by such order,
(ii) the amount or percentage of the participant's benefits to be
paid by the plan to each such alternate payee, or the manner in which
such amount or percentage is to be determined,
(iii) the number of payments to, or period of time for which such
order applies, and
(iv) each plan to which such order applies; and
(B) does not require
(i) the plan to provide any type or form of benefit, or any option,
not otherwise provided under the plan; and
(ii) the plan to provide increased benefits (determined on the
basis of actuarial equivalence); and
(iii) require the payment of benefits to an alternate payee which at
the time such order is issued, already are required to be paid to a
different alternate payee under a prior qualified domestic relations order;
and
(C) does not require the payment of benefits to any alternate payee
before the first to occur of (i) the earliest date as of which payment
of the participant's
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benefits under the plan could occur after the participant's termination of
employment and (ii) the participant's attainment of age 50,
all as determined pursuant to the procedures contained in Section 10.3. Any
amounts subject to a domestic relations order prior to determination of its
status as a qualified domestic relations order which would otherwise be paid to
the participant shall be segregated in a separate account or an escrow account
pending such determination. If within 18 months of receipt of such order by the
committee, it is finally determined that a domestic relations order constitutes
a qualified domestic relations order, the amount so segregated (plus any
interest thereon) shall be paid to the alternate payee. If such determination
is not made within such 18-month period, then the amount so segregated (plus any
interest thereon) shall, as soon as practical after the end of such 18-month
period, be paid to the participant or restored to his account. Any
determination after such period shall be applied only to payments made on or
after the date of such determination.
Section 13.3. Employment Noncontractual. The plan confers no right upon
------------- -------------------------
any employee to continue in employment.
Section 13.4. Limitation of Rights. A participant or distributee shall
------------- --------------------
have no right, title or claim in or to any specific asset of the trust, but
shall have the right only to distributions from the trust fund on the terms and
conditions herein provided.
Section 13.5. Merger or Consolidation with Another Plan. A merger or
------------- -----------------------------------------
consolidation with, or transfer of assets or
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liabilities to, any other plan shall not be effected unless the terms of such
merger, consolidation or transfer are such that each participant, distributee,
beneficiary or other person entitled to receive benefits from the plan would, if
the plan were to terminate immediately after the merger, consolidation or
transfer, receive a benefit equal to or greater than the benefit such person
would be entitled to receive if the plan were to terminate immediately before
the merger, consolidation, or transfer.
Section 13.6. Gender and Plurals. Wherever used in the plan, words in the
------------- ------------------
masculine gender shall include masculine or feminine gender, and, unless the
context otherwise requires, words in the singular shall include the plural, and
words in the plural shall include the singular.
Section 13.7. Qualified Profit Sharing Plan. It is intended that the plan
------------- -----------------------------
be a qualified profit sharing plan under section 401(a) of the Code.
ARTICLE 14
----------
TOP-HEAVY PLAN REQUIREMENTS
---------------------------
Section 14.1. Top-Heavy Plan Determination. If as of the determination
------------- ----------------------------
date (as hereinafter defined) for any plan year the aggregate of (a) the sum of
the account balances under this plan and all other defined contribution plans in
the aggregation group (as defined below) and (b) the present value of accrued
benefits under all defined benefit plans in such aggregation group of all
participants in such plans who are key employees (as
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defined in section 416(i) of the Code) for such plan year exceeds 60% of the
aggregate of the account balances and present value of accrued benefits of all
participants in such plans as of the determination date (as hereinafter
defined), then this plan shall be a top-heavy plan for such plan year, and the
requirements of Section 14.2 shall be applicable for such plan year as of the
first day thereof. If the plan shall be a top-heavy plan for any plan year and
not be a top-heavy plan for any subsequent plan year, such requirements shall
not be applicable for such subsequent plan year.
The aggregation group shall consist of (a) each plan of an employer in
which a key employee is a participant, (b) each other plan which enables such a
plan to be qualified under section 401(a) of the Code, and (c) any other plans
of an employer which the employer shall designate as part of the aggregation
group.
For purposes of this Article (i) the determination date for all plans in
the aggregation group shall be the last day of the preceding plan year, and (ii)
the valuation date applicable to a determination date shall be (a) in the case
of a defined contribution plan, the date as of which account balances are
determined which is coincident with or immediately precedes the determination
date, and (b) in the case of a defined benefit plan, the date as of which the
most recent actuarial valuation for the plan year which includes the
determination date is prepared, except that if any such plan specified a
different determination or valuation date, such different date shall be
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used with respect to such plan. For the purpose of determining the accrued
benefit or account balance of a participant, any person who received a
distribution from a plan in the aggregation group during the 5-year period
ending on the last day of the preceding plan year shall be treated as a
participant in such plan, and any such distribution shall be included in such
participant's account balance or accrued benefit as the case may be.
Section 14.2. Minimum Contribution for Top-Heavy Years. The sum of the
------------- ----------------------------------------
employer contributions under Section 4.3 allocated to the accounts of the
participant (other than a key employee as defined in section 416(i) of the Code)
for any plan year shall in no event be less than the lesser of (i) 3 percent of
such participant's compensation (as defined under section 415 of the Code)
during such plan year not in excess of the compensation limitation described in
section 401(a)(17) of the Code and (ii) the highest percentage at which
contributions are made on behalf of any key employee (as defined in section
416(i) of the Code) for such plan year. If during any plan year for which this
Section 14.2 is applicable a defined benefit plan is included in the aggregation
group and such defined benefit plan is a top-heavy plan for such plan year, the
percentage set forth in clause (i) above shall be five percent. The percentage
referred to in clause (ii) of the first sentence of this Section shall be
obtained by dividing the aggregate of contributions made pursuant to Sections
4.1, 4.2 and 4.3, and employer contributions and forfeitures allocated pursuant
to any other defined contribution
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plan which is required to be included in the aggregation group (other than a
defined contribution plan which enables a defined benefit plan which is required
to be included in such group to be qualified under section 401(a)(4) or 410 of
the Code) during the plan year on behalf of such key employee by such key
employee's compensation (as defined in Section 7.5) for the plan year which is
not in excess of $200,000 (as adjusted for increases in the cost of living in
accordance with regulations).
ARTICLE 15
----------
AMENDMENT, ESTABLISHMENT OF
SEPARATE PLAN AND TERMINATION
-----------------------------
Section 15.1. Amendment. The managing general partner or administrative
------------- ---------
general partner (or the board of directors, if applicable) of the Company may at
any time and from time to time amend or modify the plan by written instrument
duly adopted by the managing general partner of the Company or by the
administrative general partner of the Company with written notice thereof to the
managing general partner of the Company (or by resolution of the board of
directors of the Company, if applicable). Any such amendment or modification
shall become effective on such date as the managing general partner or
administrative general partner (or board of directors, if applicable) of the
Company shall determine and may apply to participants in the plan at the time
thereof as well as to future participants.
Section 15.2. Establishment of Separate Plan. If an employer shall
------------- ------------------------------
withdraw from the plan under Section 11.2, the
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<PAGE>
committee shall determine the portion of the trust fund held by the trustee
which is applicable to the participants and former participants of such employer
and direct the trustee to segregate such portion in a separate trust. Such
separate trust shall thereafter be held and administered as a part of the
separate plan of such employer.
The portion of the trust fund applicable to the participants and
former participants of a particular employer shall be the sum of:
(a) the total amount credited to all accounts which are applicable to
the participants and former participants of such employer and
(b) an amount which bears the same ratio to the excess, if any, of
(i) the total value of the trust fund over
(ii) the total amount credited to all accounts
as the total amount credited to the accounts which are applicable to the
participants and former participants of such employer bears to the total
amount credited to the accounts of all participants and former
participants.
Section 15.3. Distribution upon Termination of the Plan. Any employer
----------- -----------------------------------------
may at any time terminate its participation in the plan by resolution of its
managing general partner or administrative general partner (with notice thereof
to its managing general partner) or board of directors, as the case may be. In
the event of any such termination the committee shall determine the portion of
the trust fund held by the trustee which is applicable to the participants and
former participants of such employer and direct the trustee to distribute such
portion as follows:
-77-
<PAGE>
(a) The balance in any distributee account shall be distributed to the
distributee entitled to receive such account.
(b) The remaining assets of such portion of the trust fund shall be
distributed to participants ratably in proportion to the balances of their
respective accounts.
A complete discontinuance of contributions by an employer shall be deemed a
termination of such employer's participation in the plan for purposes of this
Section. Upon termination or partial termination of the plan, or upon the
complete discontinuance of contributions by the employers under the plan, the
accounts of affected participants and former participants shall become fully
vested. No distribution may be made under this Section 15.3, however, on
termination of the plan or an employer's participation therein except to the
extent otherwise permitted under the plan unless the employers and their
affiliates neither establish nor maintain, as provided in applicable
regulations, another qualified defined contribution plan (other than an employee
stock ownership plan as defined in Section 4975(e)(7) of the Code).
If the Internal Revenue Service shall refuse to issue an initial, favorable
determination letter that the plan and trust as adopted by an employer meet the
requirements of Section 401(a) of the Code and that the trust is exempt from tax
under Section 501(a) of the Code, the employer may terminate its participation
in the plan and the committee shall direct the trustee to pay and deliver the
portion of the trust fund applicable to the participants and former participants
of such employer, determined pursuant to Section 15.2, to such employer
-78-
<PAGE>
and such employer shall pay to participants or their beneficiaries the part of
such employer's portion of the trust fund as is attributable to contributions
made by participants.
Section 15.4. Trust to Be Applied Exclusively for Participants and Their
------------- ----------------------------------------------------------
Beneficiaries. Subject only to the provisions of the second paragraph of
- -------------
Section 4.7, Section 13.1, paragraph (b) of Section 13.2, and the second
paragraph of Section 15.3 and any other provision of the plan to the contrary
notwithstanding, it shall be impossible for any part of the trust to be used for
or diverted to any purpose not for the exclusive benefit of participants and
their beneficiaries either by operation or termination of the plan, power of
amendment or other means.
* * * *
IN WITNESS WHEREOF, Muzak Limited Partnership, by its managing general
partner, has caused this instrument to be executed, effective as of January 1,
1989.
MUZAK LIMITED PARTNERSHIP
By: MLP ACQUISITION, L.P.
Managing General Partner
By: MUSIC HOLDINGS CORP.
General Partner
BY: [SIGNATURE ILLEGIBLE]
----------------------------
Title: VICE PRESIDENT
-------------------
-79-
<PAGE>
Exhibit 10.30
<PAGE>
AMENDMENT NO. 1 TO
MUZAK LIMITED PARTNERSHIP
SAVINGS AND RETIREMENT TRUST
(As Amended and Restated Effective as of January 1, 1992)
The Muzak Limited Partnership Savings and Retirement Trust (As Amended
and Restated Effective as of January 1, 1992), (the "Trust"), is hereby amended,
effective as of July 1, 1994, in the following respects:
1. By adding a new sentence at the end of the last paragraph of
Section 6.1 of the Trust as follows:
"On and after July 1, 1994, however, transfers among the investment
funds in respect of a participant's account may also be made at such
time or times as permitted under the plan in accordance with
directions received from the participant or, in the event of his
death, his beneficiary through a telephone response system maintained
by the trustee or its agent."
2. By deleting the first sentence of Section 10.2 of the Trust and
inserting in lieu thereof as follows:
"Each amendment of the trust shall be made by delivery to the trustee
of a written instrument setting forth such amendment duly adopted by
the managing general partner of the Company or by the administrative
general partner of the Company with written notice to the managing
general partner of the Company (or by resolution of the board of
directors of the Company, if applicable)."
3. By deleting the first sentence of Section 10.3 of the Trust and
inserting in lieu thereof the following:
"Termination of the trust shall be effected by resolution of the board
of directors of the Company or, if applicable, by resolution of its
managing general partner or administrative general partner (with
notice thereof to its managing general partner)."
<PAGE>
IN WITNESS WHEREOF, MLP Acquisition, L.P., as managing general partner of
Muzak Limited Partnership, has caused this instrument to be executed as of the
20 day of December , 1994.
- ----- ----------
MUZAK LIMITED PARTNERSHIP
By: MLP ACQUISITION, L.P.
Managing General Partner
By: MUSIC HOLDINGS CORP.
General Partner
By: [SIGNATURE ILLEGIBLE]
-----------------------------------
Title:___________________________
TRUST COMPANY BANK,
Atlanta, Georgia
By: [SIGNATURE ILLEGIBLE]
-----------------------------------
Title: Group Life President
---------------------------
-2-
<PAGE>
MUZAK LIMITED PARTNERSHIP
SAVINGS AND RETIREMENT TRUST
(As Amended and Restated Effective as of January 1, 1992)
<PAGE>
MUZAK LIMITED PARTNERSHIP
SAVINGS AND RETIREMENT TRUST
(As Amended and Restated Effective as of January 1, 1992)
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - TRUST, TRUSTEE AND TRUST FUND......................... 2
Section 1.1. Trust........................................... 2
Section 1.2. Trustee......................................... 2
Section 1.3. Trust Fund...................................... 2
ARTICLE 2 - PLAN.................................................. 3
Section 2.1. Plan Definition................................. 3
Section 2.2. Delivery of Plan to Trustee..................... 3
Section 2.3. Participating Employers......................... 3
ARTICLE 3 - AUTHORIZED EMPLOYER REPRESENTATIVES................... 4
ARTICLE 4 - CONTRIBUTIONS......................................... 5
ARTICLE 5 - DISTRIBUTIONS FROM TRUST FUND......................... 5
Section 5.1. Committee to Direct Distributions............... 5
Section 5.2. Withholding of Taxes............................ 7
Section 5.3. Interests Non-Assignable........................ 7
ARTICLE 6 - INVESTMENT OF FUND.................................... 8
Section 6.1. Investments Authorized.......................... 8
Section 6.2. Limitations on Investment Authority of
Trustee.................................................. 11
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 7 - Powers and Rights of Trustee........................ 12
Section 7.1. Trustee's Powers.............................. 12
Section 7.2. Advice of Counsel............................. 15
Section 7.3. Indemnification of Trustee.................... 15
Section 7.4. Compensation and Expenses..................... 16
Article 8 - Accounts and Reports of the Trustee................. 16
Section 8.1. Records and Accounts of the Trustee........... 16
Section 8.2. Accrual Basis for Accounts.................... 17
Section 8.3. Fiscal Year................................... 17
Section 8.4. Reports....................................... 17
Section 8.5. Approval of Reports........................... 17
Article 9 - Removal, Resignation and Succession of the
Trustee..................................................... 18
Section 9.1. Removal....................................... 19
Section 9.2. Resignation................................... 19
Section 9.3. Appointment, Qualifications and Powers of
Successor Trustee...................................... 19
Section 9.4. Changes in Organization of Corporate
Trustee................................................ 20
Article 10 - Amendment or Termination........................... 20
Section 10.1. Authority to Amend or Terminate.............. 20
Section 10.2. Method of Making Amendment................... 20
Section 10.3. Termination of Trust......................... 21
Section 10.4. Diversion of Fund Prohibited................. 21
Article 11 - Continuance by a Successor......................... 22
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 12 - Participating Employers.............................. 22
Section 12.1. Participating Employers Become Parties
to Trust................................................. 22
Section 12.2. Company Appointed Agent by Participating
Employers................................................ 23
Section 12.3. Separation of Fund............................. 23
Article 13 - Controlling Law and Legal Actions.................... 25
Section 13.1. Controlling Law................................ 25
Section 13.2. Legal Actions.................................. 25
Article 14 - Miscellaneous........................................ 25
Section 14.1. Protection of Persons Dealing with
Trustee.................................................. 25
Section 14.2. Tax Exemption of Trust......................... 26
Section 14.3. No Interest in Participating Employer
Given by Trust........................................... 26
Section 14.4. Gender and Plurals............................. 26
Article 15 - Execution............................................ 27
</TABLE>
-iii-
<PAGE>
MUZAK LIMITED PARTNERSHIP
SAVINGS AND RETIREMENT TRUST
(As Amended and Restated Effective as of January 1, 1992)
Muzak Limited Partnership, a Delaware limited partnership (the
"Company"), hereby amends and restates the Muzak Limited Partnership Savings and
Retirement Trust established to implement the provisions of the Muzak Limited
Partnership Tempo Savings and Retirement Plan, as it may be amended from time to
time (the "plan").
W I T N E S S E T H:
WHEREAS, Trust Company Bank, Atlanta Georgia, has been appointed
successor trustee under the Muzak Limited Partnership Savings and Retirement
Trust effective as of January 1, 1992; and
WHEREAS, the Company and Trust Company Bank desire to amend and
restate the agreement under which such trust is established effective as of
January 1, 1992.
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Company and Trust Company Bank do hereby
covenant and agrees as follows effective as of January 1, 1992:
ARTICLE 1
---------
TRUST, TRUSTEE AND TRUST FUND
-----------------------------
Section 1.1. Trust. This instrument and the trust evidenced hereby,
----------- -----
as amended from time to time, shall be known as the Muzak Limited Partnership
Savings and Retirement Trust (the "trust").
Section 1.2. Trustee. Trust Company Bank, Atlanta, Georgia, is
----------- -------
hereby designated as trustee, to receive, hold, invest, administer and
distribute the fund in accordance with the provisions of the trust and for the
exclusive purpose of providing benefits to participants in the plan and their
beneficiaries and defraying reasonable expenses of administering such plan.
Trust Company Bank in its capacity as trustee shall be referred to hereinafter
as "the trustee".
Section 1.3. Trust Fund. The assets held under the trust by the
----------- ----------
trustee are herein referred to as the "fund". Except as herein otherwise
provided, title to assets of the fund shall at all times be vested in the
trustee, subject to
-2-
<PAGE>
the right of the trustee to hold title in bearer form or in the name of a
nominee or nominees, and the interest of others in the assets of the fund shall
be only the right to have such assets received, held, invested, administered and
distributed in accordance with the provisions of the trust.
ARTICLE 2
---------
PLAN
----
Section 2.1. Plan Definition. The term "plan" wherever used herein
----------- ---------------
shall mean the Muzak Limited Partnership Tempo Savings and Retirement Plan, as
amended from time to time.
Section 2.2. Delivery of Plan to Trustee. The Company shall deliver
----------- ---------------------------
to the trustee a certified copy of the plan and of each amendment thereto, for
convenience of reference, but the rights, powers, titles, duties and discretions
of the trustee shall be governed solely by the trust without reference to the
plan unless otherwise specifically provided herein.
Section 2.3. Participating Employers. The term "participating
----------- -----------------------
employers" wherever used herein shall mean the Company, and any other
corporation or other entity which has adopted the plan and has become a party to
the trust pursuant to Section 12.1.
-3-
<PAGE>
ARTICLE 3
---------
AUTHORIZED EMPLOYER REPRESENTATIVES
-----------------------------------
The Company on its own behalf and as agent for each participating
employer shall furnish the trustee the name and specimen signature of (i) each
person upon whose statement of the decision or direction of the Company or the
participating employers the trustee is authorized to rely and (ii) the members
of the committee established to administer the plan (the "committee"). Until
notified of a change in the identity of such person or persons the trustee shall
act upon the assumption that there has been no change.
Any notice, direction, order, request, certification or instruction of
the committee to the trustee shall be in writing signed by a member of the
committee or shall be presented at a meeting with the trustee. Except as
otherwise provided in this agreement, any action by the Company or participating
employer pursuant to any of the provisions of the plan or of this agreement
shall be authorized or evidenced by written instrument signed by its President
or one of its Vice Presidents or by written instrument executed by any person
authorized by any one of the above to take such action. The trustee shall be
entitled to rely conclusively upon any and all such notices, directions, orders,
requests, certifications and instructions received from the committee or from
the Company or participating employer given in accordance with this agreement
-4-
<PAGE>
and reasonably believed to be properly executed, and shall act and be fully
protected in acting in accordance therewith.
ARTICLE 4
---------
CONTRIBUTIONS
-------------
All contributions made under the plan shall be delivered to the
trustee. The trustee shall be accountable for all contributions received but
shall have no duty to require any contributions to be made to the trustee or to
determine that the contributions received comply with the plan or with the
resolutions of the board of directors of the participating employers providing
therefor.
ARTICLE 5
---------
DISTRIBUTIONS FROM TRUST FUND
-----------------------------
Section 5.1. Committee to Direct Distributions. Distributions in cash
----------- ---------------------------------
or in kind shall be made from the fund by the trustee to such persons or other
entities, in such manner, at such times, in such amounts and for such purposes
as the committee shall direct in writing. The trustee shall also discontinue
distributions from the fund in accordance with the directions of the committee.
The trustee shall have no responsibility as trustee to see to the application of
-5-
<PAGE>
distributions so made or to ascertain whether the directions of the committee
comply with the plan.
In the event the trustee shall deem it necessary to withhold any
payments or distributions pending compliance with legal requirements with
respect to probate of wills, appointment of a personal representative, payment
of or provision for estate or inheritance taxes, or for death duties or
otherwise, the trustee shall notify the committee and shall thereafter take no
action pending compliance, or pending receipt of the committee's instructions to
distribute.
Orders and directions from the committee need not specify the purpose
of the payment so ordered, and the trustee is not responsible in any way
respecting the purpose or propriety of such payments or for the administration
of the plan. The trustee shall not be responsible in any respect for the
adequacy of the fund to meet or discharge any payments or liabilities under the
plan; and payments shall be limited to amounts available in the fund.
Any order or direction from the committee shall constitute a
certification to the trustee that the action directed is one which is in
conformity with the provisions of the plan and of the Employee Retirement Income
Security Act of 1974, as amended from time to time ("ERISA"). To the extent
permitted by law, the trustee shall not be liable for any action taken
(especially any payment made from the fund) at the direction of the committee or
for any failure to act, if such
-6-
<PAGE>
action can under the terms of the trust be taken only after receipt from the
committee of specific directions or for failure to act pending receipt of
directions from the committee when direction is required or is requested in
writing by the trustee.
Section 5.2. Withholding of Taxes. The trustee may withhold, or
----------- --------------------
require the withholding, from any distribution which it is directed to make such
sum as the trustee may reasonably estimate is necessary to cover any taxes for
which the trustee may be liable, which are, or may be, assessed with regard to
such distribution. Upon discharge or settlement of such tax liability the
trustee shall distribute the balance of such sum, if any, to the distributee
from whose distribution it was withheld, or if such distributee is then
decreased, to such other person as the committee shall direct. Prior to making
any distribution hereunder the trustee may require such releases or other
documents from any taxing authority, or may require such indemnity and surety
bond, as the trustee shall reasonably deem necessary for its protection.
Section 5.3. Interests Non-Assignable. Except in respect of loans
----------- ------------------------
made to the participant, no right or interest of any participant or distributee
to receive distributions from the fund shall be assignable or transferable in
whole or in part, either directly or by operation of law or otherwise,
-7-
<PAGE>
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, or bankruptcy, but excluding devolution by death or mental
incompetency, and no right or interest of any participant or distributee to
receive distributions from the fund shall be liable for, or subject to, any
obligation or liability of such participant or distributee, including claims for
alimony or the support of any spouse, except to the extent provided in Section
13.2(b) of the plan.
ARTICLE 6
---------
INVESTMENT OF FUND
------------------
Section 6.1. Investments Authorized. Except as otherwise in the
----------- ----------------------
trust provided, the net income of the fund shall be accumulated, added to the
principal of the fund and invested and reinvested therewith as a single fund.
Subject to the provisions of Section 6.2 and this Section 6.1, the trustee is
authorized to invest the fund in such preferred or common stocks, bonds, notes,
and debentures (including convertible stocks and securities), mortgages,
equipment trust certificates, investment trust certificates, shares of
investment companies and mutual funds, interests in partnerships and trusts,
insurance policies or contracts, certificates of deposit and savings accounts
which bear a reasonable rate of interest, including, if the trustee is a bank,
certificates and accounts issued by or with the trustee's
-8-
<PAGE>
banking department, or in such other property, real or personal, either within
or without the United States, as the trustee may deem to be in the interest of
the participants and beneficiaries of the plan; provided, however, that no
investment may be made in either employer securities (whether or not such
securities are qualifying employer securities) or employer real property
(whether or not such property is qualifying employer real property), as such
terms are defined for purposes of Section 407 of ERISA, except to the extent
allowable under ERISA. The trustee shall diversify the investments of the fund
so as to minimize the risk of large losses, unless under the circumstances it is
clearly prudent not to do so. The trustee in its discretion may hold any portion
of the fund in cash pending investment or payment of expenses or distribution of
benefits, without liability for interest.
The trustee shall invest in an insurance investment contract upon, and
only in accordance with, a written direction from the committee to enter into a
specific insurance investment contract, or more than one such contract, with an
insurance company, or more than one such company. The responsibility of the
trustee for each such contract thereafter shall be limited to the custody
thereof and to following the committee's directions with respect thereto, which
directions may be continuing directions, including directions as the withdrawals
to be made thereafter. The trustee, in no event
-9-
<PAGE>
shall be responsible for determining, or giving advice with respect to, the
advisability or propriety of entering into any insurance investment contract or
of maintaining or terminating any such contract. Each direction from the
committee to the trustee regarding an insurance investment contract shall be
made in writing, and the trustee shall only take action, including action
related to the enforcement of any right thereunder, with respect to an insurance
investment contract upon and in accordance with the direction from the
committee. Each deposit from the fund to an insurance company shall be made only
upon an instruction, which may be a continuing instruction, from the committee.
The Company shall indemnify the trustee for any liability, loss, expenses,
assessment or other cost of any kind or description whatsoever, including legal
fees and expenses, which arise on account of any insurance investment contract
held by the trustee in the fund providing such cost is not attributable to the
trustee's own negligence, willful misconduct or lack of good faith in performing
its sole duties as custodian of such contract and further provided the Company
is given prompt written notice of any claim and the opportunity to defend or
settle it by counsel of its choice.
For purpose of this Section and any other Section of the trust, the
fair market value of any investment contract issued by an insurance company
which is held in the fund shall
-10-
<PAGE>
be determined by the trustee according to such valuation method as is directed
in writing by the committee.
The committee may direct the Trustee to establish separate investment
funds which shall be managed and invested in accordance such general purposes as
the committee shall direct. Transfers among the investment funds may only be
made at such time or times as the committee shall direct.
Section 6.2. Limitations on Investment Authority of Trustee. The
----------- -------------------------------------- -------
Company may from time to time direct the trustee to segregate all or a portion
of the funds in a separate investment account or accounts and may appoint any
person or persons, partnership or corporation as an investment adviser to the
trustee who will act as an investment manager within the meaning of Section
3(38) of ERISA with respect to such account. Upon receipt of written notice from
the Company of the appointment of such an investment adviser, the trustee shall
thereafter invest and reinvest the portion of the fund allocated to such account
as such investment adviser shall direct in writing. It shall be the duty of the
trustee to act strictly in accordance with any direction given by such an
investment adviser pursuant to this Section. The trustee shall be under no duty
to question any such direction, to review any securities or other property held
in the fund pursuant to any such direction, or to make suggestions to any such
investment adviser with respect to the exercise or non-exercise of its
-11-
<PAGE>
powers with respect to the investment and reinvestment of the fund. The trustee
shall be under no liability for any loss of any kind which may result by reason
of any action taken by it in accordance with any direction of any such
investment adviser pursuant to this section, or by reason of the trustee's
failure to take any investment action in the absence of directions from any such
investment adviser.
ARTICLE 7
---------
POWERS AND RIGHTS OF TRUSTEE
----------------------------
Section 7.1. Trustee's Powers. Subject to and consistent with the
----------- ----------------
provisions of Article 6, the trustee shall have the following powers, rights and
duties in addition to those vested in it elsewhere in the trust or by law:
(A) to retain, manage, improve, repair, operate and control any asset
of the fund;
(B) to sell, convey, transfer, exchange, partition, grant options
with respect to, lease for any term (even though such term extends beyond
the duration of this trust or commences in the future), mortgage, pledge,
or otherwise deal with or dispose of any asset of the fund in such manner,
without advertisement, for such consideration and upon such terms and
conditions as the trustee, in its discretion, shall determine;
(C) to employ such agents and counsel as may be reasonably necessary
in collecting, managing, administering, investing, distributing and
protecting the fund or the assets thereof and to pay them reasonable
compensation;
-12-
<PAGE>
(D) to settle, compromise or abandon all claims and demands in favor
of or against the fund;
(E) to vote any corporate stock either in person or by proxy for any
purposes; to exercise any conversion privilege, subscription right or any
other right or option given to the trustee as the owner of record of any
security owned by the fund and to make any payments incidental thereto; to
consent to, take any action in connection with, and receive and retain any
securities resulting from any reorganization, consolidation, merger,
readjustment of the financial structure, sale, lease or other disposition
of the assets of any corporation or other organization, the securities of
which may be an asset of the fund;
(F) to organize and incorporate (or participate in the organization
or incorporation of), under the laws of any state, a corporation for the
purpose of acquiring and holding title to any property which the trustee is
authorized to acquire for the fund and to exercise with respect thereto any
of the powers, rights and duties it has with respect to other assets of the
fund;
(G) to cause any asset of the fund to be issued, held or registered
in the name of its nominee, or in such form that title will pass by
delivery, provided the records of the trustee shall indicate the true
ownership of such asset ;
(H) to borrow money, and to secure the same by mortgaging, pledging,
or conveying the property of the fund;
(I) to invest all, or any part, of the assets of the fund in any
common, collective or group trust fund which is maintained under Code
Section 584 or Revenue Ruling 81-100, 1981-1 C.B. 326 or any successor
thereto by the trustee or any bank which is a member of an "affiliated
group" (as that term is defined in Section 1504 of the Code) with the
trustee and such common, collective or group trust automatically shall be
incorporated by this reference as part of the trust agreement for the
period such investment is made in such common, collective or group trust
fund;
(J) to make loans to plan participants as directed by the committee;
and
-13-
<PAGE>
(K) to exercise any of the powers and rights of individual owners
with respect to any property of the fund and to do all other acts which in
its judgment are necessary or desirable for the proper administration of
the fund, although such powers, rights, and acts are not specifically
enumerated in the trust.
The trustee shall not be required to make any inventory nor appraisal
nor report to any court, nor to secure any order of court for the exercise of
any of its powers (as described in this trust agreement and as otherwise
provided by law), and the trustee shall not be required to give bond.
The trustee shall discharge its duties solely in the interest of
participants and their beneficiaries and with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matter, would use in the conduct of an
enterprise of a like character and with like aims.
Notwithstanding any contrary provision hereof, the trustee may appoint
a subsidiary of the trustee to manage (including the power of acquire and
dispose of) any assets held by the trustee hereunder, to such extent and upon
such terms as the trustee deems best, provided:
(i) such manager is registered as an investment adviser under
the Investment Advisers Act of 1940;
-14-
<PAGE>
(ii) such manager acknowledges in writing to the trustee at the
time of such appointment that such manager is a fiduciary
with respect to the plan;
(iii) the trustee shall remain responsible for the actions of such
investment manager to the same extent as if such actions
were performed by the trustee; and
(iv) no additional fee is charged for such manager's services and
such appointment is not prohibited by or in violation of any
provision of ERISA.
Section 7.2. Advice of Counsel. The trustee may consult with legal
----------- -----------------
counsel, who may be counsel for any participating employer, in respect of any of
its rights, duties or obligations hereunder.
Section 7.3. Indemnification of Trustee. The trustee shall be
----------- --------------------------
indemnified and saved harmless by the participating employers and the general
partner of the Company from and against any and all claims, loss, damages,
expenses and liability to which the trustee may be subjected by reason of any
act taken or omitted to be done in its official capacity in carrying out any
directions of the Company, the participating employers or the committee issued
in accordance with this
-15-
<PAGE>
Agreement, including all expenses reasonably incurred in their defense in case
the participating employers fail to provide such defense.
Section 7.4. Compensation and Expenses. The trustee shall be
----------- -------------------------
entitled to such reasonable compensation as may be agreed upon from time to time
by the participating employers and the trustee. The trustee is authorized and
directed to pay from the fund all costs and expenses incurred in administering
the plan and the fund, including the fees and expenses of the trustee, the fees
of counsel for the trustee and other administrative expenses to the extent such
expenses are not paid by the participating employers.
ARTICLE 8
---------
ACCOUNTS AND REPORTS OF THE TRUSTEE
-----------------------------------
Section 8.1. Records and Accounts of the Trustee. The trustee shall
----------- -----------------------------------
maintain accurate and detailed records and accounts of all transactions of the
trust and make them available at all reasonable times for inspection or audit by
any person designated by the Company. At the direction of the Company the
trustee shall submit to the auditors for the Company and to others designated by
the Company such valuations, reports or other information as they may reasonably
require.
-16-
<PAGE>
Section 8.2. Accrual Basis for Accounts. All accounts of the trustee
----------- --------------------------
shall be kept on an accrual basis.
Section 8.3. Fiscal Year. The fiscal year of the trust shall be the
----------- -----------
same as that of the Company, and if the Company notifies the trustee that the
Company has changed its fiscal year, the trustee shall take the necessary steps
to change the fiscal year of the trust to correspond therewith.
Section 8.4. Reports. As soon as practicable following the close of
----------- -------
each fiscal year of the trust or as of the close of such other accounting period
as the Company may from time to time designate, and following the effective date
of the removal or resignation of any trustee, the trustee shall file with the
Company a written report setting forth all transactions with respect to the fund
during the period from the date of its last such account and listing the assets
of the fund and the market value thereof as of the close of the period covered
by such report.
Section 8.5. Approval of Reports. Upon the receipt by the trustee of
----------- -------------------
Company's written approval of any such report, or upon the expiration of six
months after delivery of any such, report to the Company, such report (as
originally stated if no objection has been theretofore filed by the Company, or
as theretofore adjusted pursuant to agreement
-17-
<PAGE>
between the Company and the trustee) shall be deemed to be approved by the
Company except as to matters, if any, covered by written objections theretofore
delivered to the trustee by the Company regarding which the trustee have not
given an explanation or made adjustments satisfactory to the Company, and the
trustee shall be released and discharged as to all items, matters and things set
forth in such report which are not covered by such written objections as if such
report has been settled and allowed by a decree of a court having jurisdiction
regarding such report and of the trustee and the participating employers. The
trustee, nevertheless, shall have the right to have their accounts and reports
settled by judicial proceedings if they so elect, in which event the Company and
the trustee shall be the only necessary parties (although the trustee may also
join such other parties as they may deem appropriate).
ARTICLE 9
---------
REMOVAL, RESIGNATION AND SUCCESSION OF THE TRUSTEE
--------------------------------------------------
Section 9.1. Removal. The Company, by resolution of its board of
----------- -------
directors or by resolution of the board of directors of its general partner, if
applicable, may remove any trustee at any time, such removal to take effect upon
the effective date of the appointment of a successor trustee as hereinafter
provided.
-18-
<PAGE>
Section 9.2. Resignation. Any trustee may resign by delivering to
----------- -----------
the Company a written resignation to take effect upon the 60th day after the
delivery thereof to the Company or upon such earlier date as may be acceptable
to the Company.
Section 9.3. Appointment, Qualifications and Powers of Successor
----------- ---------------------------------------------------
Trustee. The Company may appoint additional or successor trustees at any time
- -------
by resolution of its board of directors or of the board of directors of its
general partner, if applicable, such appointment to become effective upon the
delivery to any trustee then in office and to any removed or resigning trustee
of a copy of such resolution certified by an officer of the Company and upon
written acceptance of the trust by the additional or successor trustee so
appointed. Each additional or successor trustee shall have all the rights,
powers, title, discretions, duties and immunities given to, or acquired by, the
original trustees. The legal title to the assets of the fund shall be and remain
vested in the trustee from time to time acting hereunder without any transfer or
conveyance to, by, or from any succeeding or retiring trustee. No successor
trustee shall be liable for the acts or omissions of any prior trustee or be
obliged to examine the accounts, words, acts or omissions of any prior trustee.
-19-
<PAGE>
Section 9.4. Changes in organization of Corporate Trustee. In the
----------- --------------------------------------------
event that any corporate trustee at any time acting hereunder shall be converted
into, shall merge or consolidate with, or shall sell or transfer substantially
all of its assets and business to, another corporation, state or federal, the
corporation resulting from such conversion, merger or consolidation, or the
corporation to which such sale or transfer shall be made, shall thereupon become
and be a trustee of the trust with the same effect as though specifically so
named.
ARTICLE 10
----------
AMENDMENT OR TERMINATION
------------------------
Section 10.1. Authority to Amend or Terminate. Subject to the
------------ -------------------------------
provisions of Section 10.4, the Company shall have the right at any time and
from time to time to amend the trust in any manner, in whole or in part, or to
terminate the trust, provided that no amendment which changes the duties or
liabilities of the trustee shall be made without its written consent.
Section 10.2. Method of Making Amendment. Each amendment of the
------------ --------------------------
trust shall be made by delivery to the trustee of a written instrument setting
forth such amendment duly executed by the Company, together with a certified
copy of a
-20-
<PAGE>
resolution of the board of directors of the Company, or of the board of
directors of the general partner of the Company, if applicable, authorizing the
execution of such written instrument. Such written instrument (with the consent
of the trustee endorsed thereon, if their duties or liabilities are changed
thereby) shall constitute the instrument of amendment.
Section 10.3. Termination of Trust. Termination of the trust shall
------------ --------------------
be effected by resolution of the board of directors of the Company or of its
general partner if applicable. Written notice of such termination, together
with a certified copy of such resolution, shall be delivered to the trustee, and
the trustee shall dispose of the fund in the manner directed in writing by the
Company or, in the absence of directions from the Company, in such manner as may
be directed by a judgment or decree of a court of competent jurisdiction. The
powers of the trustee hereunder shall continue as long as any assets of the fund
shall remain in their hands.
Section 10.4. Diversion of Fund Prohibited. Subject only to the
------------ ----------------------------
provisions of the second paragraph of Section 4.8 and the second paragraph of
Section 15.3 of the plan, at no time (either by operation, amendment or
termination of the plan or trust, or otherwise) shall any part of the fund
(other than such part as is required to pay taxes and administration expenses)
be used for, or diverted to, purposes other than for
-21-
<PAGE>
the exclusive benefit of employees of the participating employers or their
beneficiaries.
ARTICLE 11
----------
CONTINUANCE BY A SUCCESSOR
--------------------------
In the event that any participating employer shall be reorganized by
way of merger, consolidation, transfer of assets or otherwise, so that another
corporation or other entity other than a participating employer shall succeed to
all or substantially all of such participating employer's business, such
successor corporation or entity may be substituted for such participating
employer as a party to the trust by executing an appropriate supplemental
agreement with the trustee.
ARTICLE 12
----------
PARTICIPATING EMPLOYERS
-----------------------
Section 12.1. Participating Employers Become Parties to Trust. Any
------------ -----------------------------------------------
corporation or other entity which shall adopt the plan pursuant to Section 11.1
thereof shall become a party to the trust by filing with the Company and the
trustee a duly executed instrument in the form hereto annexed as "Exhibit A."
Moneys thereafter remitted to the trustee by or on behalf of
-22-
<PAGE>
such participating employer and its employees and the income therefrom shall be
held by the trustee as a part of the fund.
Section 12.2. Company Appointed Agent by Participating Employers.
------------ --------------------------------------------------
Each participating employer which shall become a party to the trust pursuant to
Article 11 or Section 12.1 by so doing shall be deemed to have appointed the
Company its agent to exercise on its behalf all of the powers and authorities
hereby conferred upon the Company by the terms of the trust including, but not
by way of limitation, the power to amend or terminate the trust. The authority
of the Company to act as such agent shall continue unless and until the portion
of the trust held for the benefit of employees of the particular participating
employer and their beneficiaries is set aside in a separate trust as provided in
section 12.3.
Section 12.3. Separation of Fund. Each participating employer
------------ ------------------
reserves the right to cause the trustee to set aside from the fund such portion
of the fund as the Company shall determine to be held for the benefit of the
employees of such participating employer (such participating employer being
hereinafter referred to as the "withdrawing employer") and their beneficiaries
under the plan. Any portion which is so segregated shall thereafter constitute
a separate trust fund and shall be held upon a separate trust identical to that
hereby established, except that with respect thereto this
-23-
<PAGE>
agreement shall be construed as if the withdrawing employer were the only
participating employer named herein. Thereafter with respect to such separate
trust fund all powers and authority herein conferred upon the Company shall
devolve upon the withdrawing employer. Upon the request of a withdrawing
employer, the Company shall give written directions to the trustee with respect
to such segregation, a copy of which shall be given to each participating
employer which shall then be a party to this trust. Such directions shall
specify not only the amount to be segregated, but the particular assets of the
fund which shall be used to constitute such separate trust fund. The trustee
shall follow such directions of the Company which shall constitute a conclusive
determination that the amount and the assets so segregated represent the share
which should be held upon a separate trust for the benefit of the employees of
the withdrawing employer and their beneficiaries under the plan, unless one or
more of the participating employers shall file with the trustee and the Company
a written protest within 30 days after such directions are given to the trustee.
-24-
<PAGE>
ARTICLE 13
----------
CONTROLLING LAW AND LEGAL ACTIONS
---------------------------------
Section 13.1. Controlling Law. To the extent not preempted by ERISA,
------------ ---------------
the trust shall be construed, enforced and administered according to Georgia
law.
Section 13.2. Legal Actions. The Company shall have the authority to
------------ -------------
enforce the trust on behalf of any and all persons having or claiming any
interest in the fund. In any legal action or equitable proceeding pertaining to
the trust or the fund or any interest therein or the administration thereof, or
for instructions to the trustee, the Company and the trustee shall be the only
necessary parties.
ARTICLE 14
----------
MISCELLANEOUS
-------------
Section 14.1. Protection of Persons Dealing with Trustee. No person
------------ ------------------------------------------
dealing with the trustee shall be required or entitled to see to the application
of any money paid or property delivered to the trustee, or to determine whether
or not the trustee is acting pursuant to authority granted to it hereunder or to
authorizations or directions herein required.
-25-
<PAGE>
Section 14.2. Tax Exemption of Trust. The trust is hereby designated
------------ ----------------------
as constituting a part of a plan intended to qualify and to be tax exempt under
Section 401(a) and Section 501(a) of the Internal Revenue Code of 1986, as
amended from time to time. Until advised otherwise, the trustee may
conclusively assume that the trust is tax exempt.
Section 14.3. No Interest in Participating Employer Given by Trust.
------------ ----------------------------------------------------
Neither the creation of the trust nor anything contained in the trust shall be
construed as giving any person or employee of any participating employer any
equity or interest in the assets, business, or affairs of any participating
employer or any right to continue in the employ of any participating employer.
Section 14.4. Gender and Plurals. In the trust, words in the
------------ ------------------
masculine gender shall include masculine or feminine gender, and, unless the
context otherwise requires, words in the singular shall include the plural, and
words in the plural shall include the singular.
-26-
<PAGE>
ARTICLE 15
----------
EXECUTION
---------
The trust may be executed in any number of counterparts, each of which
shall be considered an original, and no other counterpart need be produced.
IN WITNESS WHEREOF, the Field/Muzak, Inc, a Delaware corporation, as
general partner of the Company, has caused this instrument to be signed and its
corporate seal hereto affixed by its authorized officers, and the trustee, to
evidence its acceptance of the trust and its agreement to perform the duties
given or required of it by the trust, has caused the trust to be signed and its
corporate seal hereto affixed by its authorized officers, all as of the 1st day
of January, 1992.
FIELD/MUZAK, INC.
as General Partner of
Muzak Limited Partnership
By: [SIGNATURE ILLEGIBLE]
(Corporate Seal) ----------------------------------
Title: PRESIDENT
-------------------------------
ATTEST:
/s/ Thomas M. Schroeder
- -------------------------
Secretary
-27-
<PAGE>
TRUST COMPANY BANK,
Atlanta, Georgia
By: [SIGNATURE ILLEGIBLE]
------------------------------
Title: Vice President
---------------------------
(Corporate Seal)
Attest:
[SIGNATURE ILLEGIBLE]
- ----------------------------
-28-
<PAGE>
Exhibit 10.31
<PAGE>
MUZAK LIMITED PARTNERSHIP
MANAGEMENT INCENTIVE PLAN - SENIOR MANAGEMENT
I. PLAN PURPOSE
------------
The purpose of the Muzak Limited Partnership Incentive Plan (the "Plan") is
to provide key management employees of Muzak Limited Partnership (the
"Company") with an additional incentive to exert their best efforts on
behalf of the Company by rewarding them with an opportunity to earn
additional compensation.
II. PLAN SUMMARY
------------
A participant of the Plan may receive additional compensation above their
base salary if during the measurement period (a calendar year) the Company
and/or the participant achieve certain goals.
III. PLAN DETAILS
------------
The Plan is made up of two types of goals: EBITDA and personal goals. To
be eligible for a payment under the EBITDA goal, at least 90% of the budget
level must be achieved.
The bonus amount will be determined by multiplying the sum of the attained
performance level percentages by the participant's annual salary at the end
of the measurement period. For example:
If the Company's EBITDA level is at 110% of budget, and 100% of personal
goals are attained, the bonus calculation for a participant with a base
salary of $40,000 will be:
<TABLE>
<CAPTION>
Performance Bonus as %
Level of Salary
----------- ----------
<S> <C> <C>
EBITDA 110% 30%
Personal Goals 100% 10%
--
40%
</TABLE>
$40,000 x 40% = $16,000 bonus
<PAGE>
Muzak Limited Partnership
Senior Management Incentive Plan
Page Two
The personal goal portion of the bonus is independent of achievement levels
for EBITDA, and is eligible for payment based on achievement of personal
goals.
IV. DETERMINATION OF GOALS
----------------------
The EBITDA goal shall be deemed to be budget levels for loot attainment.
For personal objectives, each participant will have up to four quantifiable
and/or measurable objectives that will be agreed to in writing.
V. DETERMINATION OF PARTICIPANTS
-----------------------------
Participants in the Plan will be determined by the President of the
Company.
VI. PAYMENT
-------
Payment will be made by March 1 of the year following the measurement
period. For calculation purposes, a participant's salary at the end of the
plan year will be used. Interpolation will be used between performance
levels to determine awards.
In the event that a Plan participant's employment is terminated during the
measurement period, a prorated bonus may be awarded based on the discretion
of the President.
New participants entering the Plan during the measurement period will be
eligible for a bonus on a prorated basis.
In all prorated cases, the annual bonus amount will be multiplied by the
number of months the participant has been included in the Plan and divided
by twelve months. For example:
An employee with a $40,000 base salary enters the Plan August 1st. Using
the same numbers from Section III. Plan Details, the bonus calculation
would be:
$40,000 x 40% = $16,000 x 5/12 = $6,666.67
VII. ADJUSTMENTS
-----------
The performance levels will be modified for large unplanned changes, such
as acquisitions, divestitures or development projects.
<PAGE>
Exhibit 10.32
<PAGE>
AMENDMENT NO. 1
TO
MANAGEMENT OPTION PLAN
(Effective as of December 1, 1993)
WHEREAS, Muzak Limited Partnership (formerly, MLP Operating, L.P) (the
"Partnership") adopted a Management Option Plan effective August 31, 1992 (the
"Plan");
WHEREAS, the Partnership desires to amend the Plan to increase the number
of Units which may be made subject to options granted pursuant to the Plan to
1,869,545 Units of Class B Interest; and
WHEREAS, in accordance with Section 18 of the Plan and the terms and
conditions of the Second Amended and Restated Agreement of Limited Partnership
of the Partnership, the Partnership has approved and adopted this Amendment No.
1.
NOW THEREFORE, the Plan is hereby amended by changing the number
"1,704,545" in the third line of Section 2 thereof to "1,869,545".
Except as specifically set forth herein, the terms of the Plan shall remain
unchanged and in full force and effect.
Capitalized terms used herein and not otherwise defined herein shall have
the meaning set forth in the Plan.
<PAGE>
MANAGEMENT OPTION PLAN
(Effective August 31, 1992)
1. Purpose. The purpose of the Plan is to further the best interests of
-------
MLP operating, L.P. (the "Partnership") by encouraging key employees of the
Partnership to continue association with the Partnership and by providing
additional incentive for unusual industry and efficiency through offering them
an opportunity to acquire on reasonable terms a proprietary stake in the
Partnership and its future growth. The Partnership believes that this goal may
best be achieved by granting options (the "Options") to acquire units (the
"Units") of limited partnership interest in the Partnership to employees of the
Partnership (the "Optionees").
The options to be granted pursuant to the Plan shall not be Incentive Stock
Options (as defined in Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code")).
2. Option Units. The Units which may be made subject to Options granted
------------
pursuant to the Plan shall be a total maximum of 1,704,545 units of the Class B
limited partnership interest (the "Class B Interests"). If any Options expire or
terminate for any reason without having been exercised in full, the unpurchased
Units subject thereto shall again be available for the purposes of the Plan.
1
<PAGE>
3. Effective Date of Plan. The Plan shall take effect on or before the
----------------------
Closing Date (as hereinafter defined).
4. Administration of the Plan. The Plan shall be administered by MLP
--------------------------
Acquisition, L.P., the managing general partner of the Partnership (the
"Managing General Partner"). The interpretation and construction by the
Managing General Partner of any provisions of the Plan or of any Options granted
hereunder shall be final, binding and conclusive. The Managing General Partner
shall not be liable for any action or determination made in good faith with
respect to the Plan or any Options granted hereunder.
5. Eligibility. The persons eligible to participate in the Plan as
-----------
recipients of Options shall include only the employees of the Partnership who
hold executive or other responsible positions in the management of the affairs
of the Partnership.
6. Grant of Options. On the date (the "Closing Date") of the closing of
----------------
the transactions contemplated by that certain Asset Purchase Agreement ("Asset
Purchase Agreement"), dated as of March 11, 1992, by and among the Partnership,
Muzak Limited Partnership, Field/Muzak, Inc. and The Field Corporation, as
amended pursuant to Section 6.8 thereof by Seller's letters dated April 22, 1992
and August 20, 1992, Amendment No. 1 thereto dated as of June 26, 1992,
Amendment No. 2 thereto dated July 31, 1992 and Amendment No.3 thereto dated as
of August 26, 1992, the
2
<PAGE>
Partnership, by action of the Managing General Partner and subject to the
provisions of the Plan, shall grant Options to purchase all of the Units
described in Section 2 to such eligible persons as may be selected by the
Managing General Partner. In the event any of such Options shall expire or
terminate prior to the termination of the Plan for any reason without having
been exercised in full, the Managing General Partner may grant new Options with
respect to the Units (covered by such expired or terminated Options to such
eligible persons as may be selected by the Managing General Partner and subject
to the provisions of the Plan. Each grant of an option pursuant to the Plan
shall be made in writing and upon such terms and conditions as may be determined
by the Managing General Partner at the time of grant, subject to the provisions
and limitations set forth in the Plan. The grant of such Option shall be
evidenced by a written agreement or certificate executed by the Managing General
Partner.
7. Option Price. The purchase price (the "Option Exercise Price") for
------------
each Unit placed under option pursuant to the Plan shall be (a) one Dollar
($1.00), with respect to Options granted on the Closing Date, and (b) "Fair
Market Value" (as such term is defined in the Amended and Restated Agreement of
Limited Partnership of the Partnership (the "Partnership Agreement")) on the
date the Option is granted, with respect to Options granted after the Closing
Date, if any.
3
<PAGE>
8. Duration of Options. The period (the "Option Period") for which each
-------------------
Option granted hereunder shall be effective shall commence upon the date of the
grant of such Option and shall continue until such option shall be terminated
according to its terms or as hereinafter provided, but in no event (except as
described in Section 15) shall such period exceed six (6) years from the date of
grant. In addition to and in limitation of the above, the Option Period of any
option shall terminate on the date (the "Termination Date") upon which the
optionee ceases to be a full-time employee of the Partnership for any reason
whatsoever and such option shall no longer be exercisable and shall terminate,
except with respect to the Vested Percentage of such option, if any, as
determined pursuant to Section 9 hereof, as to which the Option Period shall
terminate on the sixtieth day after the later of (i) the date on which such
option becomes exercisable, if ever, or (ii) the Termination Date of such
Option.
Neither the existence of the Plan nor the grant of any Option shall limit
whatever right the Partnership might otherwise have to terminate the employment
of any optionee.
9. Vesting. (a) The Vested Percentage of each option held by any
-------
Optionee who shall be employed full-time by the Partnership on August 31, 1997
shall be 100 percent. The Vested Percentage of each option held by any optionee
whose full-time
4
<PAGE>
employment by the Partnership shall terminate prior to such date for any reason
whatsoever (other than for "Cause" (as defined in Section 9(c) hereof)) shall be
as follows:
(i) Zero percent, if such termination of employment shall occur on or
prior to August 31, 1993.
(ii) 20 percent, if such termination of employment shall occur
subsequent to August 31, 1993 and on or prior to August 31, 1994, and if,
as of such later date, the Partnership's cumulative "EBITDA" (as defined in
Section 13 hereof) shall be "On Plan (as defined in Section 9(b) hereof).
(iii) 40 percent, if such termination of employment shall occur
subsequent to August 31, 1994 and on or prior to August 31, 1995 and if, as
of such later date, the Partnership's cumulative EBITDA shall be On Plan.
(iv) 60 percent, if such termination of employment shall occur
subsequent to August 31, 1995 and on or prior to August 31, 1996 and if, as
of such later date, the Partnership's cumulative EBITDA shall be On Plan.
(v) 80 percent, if such termination of employment shall occur
subsequent to August 31, 1996 and on or prior to August 31, 1997 and if, as
of such later date, the Partnership's cumulative EBITDA shall be On Plan.
5
<PAGE>
(b) For purposes of the Plan, the Partnership's cumulative EBITDA shall be
deemed to be "On Plan" at any date if such cumulative EBITDA as of such date
shall equal or exceed the aggregate amounts set forth in column I of Exhibit A
annexed hereto with respect to such date.
(c) The Vested Percentage of each Option held by any Optionee whose full-
time employment by the Partnership shall be terminated for Cause prior to August
31, 1997 shall be zero percent. The term "Cause" used in connection with a
termination of employment of an Optionee shall mean, except as otherwise
provided in any employment agreement between such Optionee and the Partnership
(in which case the term "Cause" as used herein with respect to such Optionee
shall have the meaning ascribed to it therein), (i) the willful and continued
failure by such Optionee to perform substantially his or her duties to the
Partnership (other than any such failure resulting from his or her Disability
(as defined in the Partnership Agreement)) within thirty days after a written
demand for substantial performance is delivered to such Optionee by the
Partnership or the Managing General Partner, which demand specifically
identifies the manner in which the Partnership or the Managing General Partner
believes that such Optionee has not substantially performed his or her duties,
(ii) the conviction by a court of competent jurisdiction of such Optionee of any
offense, regardless of classification, related to such Optionee's duties and
responsibilities to the
6
<PAGE>
Partnership, (iii) the negligent performance by such Optionee of his or her
duties to the Partnership if such negligent performance is reasonably determined
by the Partnership or the Managing General Partner to have had or to be
reasonably likely to have a material adverse effect on the business, assets,
prospects or financial condition of the Partnership, or (iv) the conviction of
such Optionee by a court of competent jurisdiction of a felony.
10. Non-Transferability. Options granted pursuant to the Plan shall not
-------------------
be transferred by the Optionee except to a deceased Optionee's executors, legal
heirs, administrators or testamentary trustees and beneficiaries, provided, the
--------
Optionee may pledge the Options to the Company and/or to the holders of the
Specified Debt (as such term is defined in the Partnership Agreement). During
the lifetime of the Optionee, the Options may be exercised only by him or her.
11. Termination of the Plan. The Plan shall terminate upon the close of
-----------------------
business on the sixth anniversary of the first date of grant of Options
hereunder (the "Date of Grant") unless it shall have sooner terminated by there
having been granted and fully exercised Options covering all of the Units
subject to the Plan. Any Option outstanding under the Plan at the time of the
termination of the Plan shall remain in effect until such Option shall have been
exercised or shall have expired in accordance with its terms.
7
<PAGE>
12. Termination of Employment. The employment of an Optionee shall not be
-------------------------
deemed to have terminated if the Optionee is absent upon a bona fide leave of
absence.
13. Exercisability of Options. Each Option granted under the Plan shall
-------------------------
become exercisable with respect to the Vested Percentage of the Units covered
thereby if (a) the Partnership's cumulative "EBITDA" (as hereinafter defined)
equals or exceeds $96 million (such amount, as the same may be adjusted as
provided in Section 16(b), being referred to herein as the "Cap Threshold") for
the five year period ending on August 31, 1997 (the "Five Year Period") and (b)
during the Five Year Period at least $22,400,000 of the long-term indebtedness
of the Partnership shall have been repaid (other than with the proceeds of
refinancings of such indebtedness); provided, however, that, if the cumulative
-------- -------
EBITDA for the Five Year Period (the "Five Year EBITDA") equals or exceeds $66
million (such amount, as the same may be adjusted as provided in Section 16(b),
being referred to herein as the "Floor Threshold" and, together with the Cap
Threshold, the "Thresholds") but is less than the Cap Threshold, each Option
shall become exercisable on August 31, 1997 but only with respect to the "Earned
Portion" (as defined below) of the Vested Percentage of the Units covered by the
Option. If Five Year EBITDA is less than the Floor Threshold, none of the
Options shall be exercisable and all of the Options shall terminate. EBITDA
shall mean, with respect to any period, the sum of
8
<PAGE>
(a) earnings before interest and income taxes as approved by the Partnership's
auditors for such period, (b) all non-cash expenses of the Partnership reflected
on the Partnership's income statements for such period, including depreciation
and amortization, and (c) any management or similar fees paid to Centre Capital
Investors L.P. ("CCI") or any other controlling person of the Partnership
reflected on such income statements. The Earned Portion of the Units covered by
an Option shall be the number of Units equal to the sum of (i) 46.81% of the
---
Vested Percentage of the Units covered by an Option plus (ii) the product of
----
(a) 53.19% of the Vested Percentage of the Units covered by an Option and (b) a
fraction the numerator of which is the excess of Five Year EBITDA over the Floor
Threshold and the denominator of which is the difference between the Cap
Threshold and the Floor Threshold, provided, that in no event shall such
fraction be greater than one (1).
On the date of the consummation of a "Transfer Event" (as defined below)
(or such earlier date as is required to give full force and effect to such
rights of exercise in connection with such Transfer Event) all of the
outstanding Options shall become exercisable but only to the extent of the
"Transfer Event Earned Portion" (as defined below) of the Units covered by the
Options if, as of the last day of the calendar month immediately preceding the
exercise date, the Partnership's
9
<PAGE>
cumulative EBITDA shall be On Plan. The Transfer Event Earned Portion of the
Units covered by an Option shall be the number of Units equal to the sum of (i)
46.81% of the number of Units covered by such Option plus (ii) the product of
----
(a) 53.19% of the number of Units covered by such Option and (b) a fraction the
numerator of which is the excess of cumulative EBITDA for the period from August
31, 1992 to the last day of the calendar month immediately preceding the
exercise date of such Option over the aggregate amounts in Column 1 of Exhibit A
hereto for such period and the denominator of which is the difference between
the aggregate amounts in Column 1 and Column 2 of Exhibit A hereto for such
period (provided that in no event shall such fraction be greater than one (1)).
A Transfer Event shall mean (i) a Transfer (as such term is defined in the
Partnership Agreement) of substantially all of the assets of the Partnership,
(ii) a change in control of the board of directors of the general partner of the
Managing General Partner (or, if the Partnership is incorporated, of the board
of directors of the successor corporation) pursuant to which any single Person
other than an Affiliate (as such terms are defined in the Partnership Agreement)
of the Partnership acquires control of such board of directors or (iii) the
Transfer of at least 51% or more of the voting equity interests in the
Partnership (or any parent entity of the Partnership), whether by sale, merger
or consolidation to any single Person or two or more Affiliated
10
<PAGE>
Persons (provided that such two or more Affiliated Persons would be considered
to be acting in concert as a "group" for purposes of Section 13(d) of the
Securities Exchange Act of 1934, for purposes hereof treating such voting equity
interests as if such voting equity interests were equity securities in respect
of which a Schedule 13D would be required to be filed with the Securities and
Exchange Commission as if the requisite percentage and other threshold
conditions to such filing were satisfied) (other than a pledge of such interests
to the Partnership to secure the Promissory Notes (as such term is defined in
the Partnership Agreement) and/or the holders of the Specified Debt); provided,
however, that a "Transfer Event" shall not include (a) a change of control of
("CCI") or Centre Partners L.P. ("Centre Partners") or their successors (unless
at the time of such change of control, substantially all the operating assets of
CCI or Centre Partners directly or indirectly, consist of assets of the
Partnership), (b) any Transfer of the voting equity interests in the Partnership
of CCI or the Managing General Partner to each other and/or to an Affiliate or
one or more partners of CCI, the Managing General Partner or Centre Partners, or
(c) a Transfer of substantially all of the assets of the Partnership in
connection with an incorporation of the Partnership and its business and assets
in accordance with the provisions of the Partnership Agreement.
11
<PAGE>
14. Procedure for Exercise and Payment for Units. (a) Exercise of an
--------------------------------------------
Option shall be made by the giving of written notice to the Partnership by the
Optionee. Such written notice shall be deemed sufficient for this purpose only
if delivered to the Partnership at its principal offices and only if such
written notice states the number of Units with respect to which the Option is
being exercised and, further, states the date, not more than ninety (90) days
after the date of such notice, upon which the Units shall be purchased and
payment therefor shall be made. The payments for Units purchased pursuant to
exercise of an Option shall be made at the principal offices of the Partnership.
Upon the exercise of any Option, in compliance with the provisions of this
paragraph and upon receipt by the Partnership of the payment for the Units so
purchased together with the payment of the amount of any taxes (the "Withholding
Taxes") required to be collected or withheld as a result of the exercise of such
Option together with an executed copy of the Partnership Agreement, unless such
Optionee is already a party thereto, the Partnership shall deliver or cause to
be delivered to the Optionee so exercising an Option a certificate or
certificates for the number of Units with respect to which the Option is so
exercised and payment is so made. The Units shall be registered in the name of
the exercising Optionee, provided that, in no event shall any Units be issued
pursuant to exercise of an Option until full payment therefor shall have been
made by cash or certified or bank cashier's check and not until the Units have
12
<PAGE>
been issued shall the exercising Optionee have any of the rights of a limited
partner of the Partnership (other than the rights that such Optionee has by
virtue of his already being a limited partner). For purposes of this paragraph,
the date of issuance shall be the date upon which payment in full has been
received by the Partnership as provided herein. In the event of the death of an
Optionee, a condition of exercising any Option shall be the delivery to the
Partnership of such tax waivers and other documents as the Managing General
Partner shall reasonably determine.
(b) Notwithstanding any other provision of the Plan, if an Optionee
determines to exercise an Option, the Partnership may notify an Optionee, after
the Partnership's receipt of the notice by the Optionee pursuant to Section
14(a), that the Partnership will settle such Option in cash, or a "Permitted
Security" (as defined in the Partnership Agreement) if the Partnership is then
prohibited from making payment in cash, by paying the Optionee on a date (the
"Settlement Date") to occur as soon as practicable after such notification, and
in all events within ninety (90) days after the date of such notice, an amount
equal to (A) the difference between (i) the aggregate Fair Market Value on the
Settlement Date of the Units with respect to which the Optionee requested the
exercise of the Option and (ii) the aggregate Option Exercise Price for such
Units, less (B) any Withholding Taxes with respect to such payment less (c) an
amount (the "Promissory Note Amount") equal to (i) the then outstanding
13
<PAGE>
principal amount of the Optionee's Promissory Note, together with accrued
interest thereon, if any, minus (ii) an amount equal to the price to be paid by
such Optionee for Units pursuant to the last sentence of this Section 14,
provided, that if the Partnership is to pay for such settled Option with a
- --------
Permitted Security, the Partnership may only elect to do so with the consent of
the Optionee (and if the Optionee does not so consent, the Option shall be
settled with Units in accordance with the provisions of section 14(a)). The
Partnership shall apply the Promissory Note Amount to the repayment of the
Optionee's Promissory Note. In the event that the Partnership determines
(subject to the limitation imposed in the proviso to the previous sentence) to
settle an Option in cash or a Permitted Security, the Optionee shall thereafter
have the right to purchase such Units from the Partnership at a price equal to
the Fair Market Value on the Settlement Date, in accordance with the provisions
of Section 11.12 of the Partnership Agreement.
15. Requirements of Law and of Certain Agreements. If any law or any
---------------------------------------------
regulation of any commission or agency of competent jurisdiction shall require
the Partnership or the exercising Optionee to take any action with respect to
the Units acquired by the exercise of an Option, then the date upon which the
Partnership shall issue the Units shall be postponed until full compliance has
been made with all such requirements of law or regulation; provided, that the
--------
Partnership shall use its best
14
<PAGE>
efforts to promptly take all necessary action to comply with such requirements
of law or regulation. Further, if requested by the Partnership, at or before the
time of the issuance of the Units with respect to which exercise of an Option
has been made, the exercising Optionee shall deliver to the Partnership his
written statements satisfactory in form and content to the Partnership, that he
intends to hold the Units so acquired by him on exercise of his Option for
investment and not with a view to resale or other distribution thereof to the
public in violation of the Securities Act of 1933. Moreover, in the event that
the Partnership shall determine that, in compliance with the Securities Act of
1933 or other applicable statutes or regulations, it is necessary to register
any of the Units with respect to which an exercise of an Option has been made,
or to qualify any such Units for exemption from any of the requirements of the
Securities Act of 1933 or any other applicable statute or regulation, no Options
may be exercised (and any resulting delay will not otherwise derogate from the
rights of the Optionee to exercise the Option thereafter) and no Units shall be
issued to the exercising Optionee until the required action has been completed;
provided, that the Partnership shall use its best efforts promptly to take all
- --------
necessary action to comply with such requirements of law or regulation.
16. Adjustments. (a) In the event that a distribution shall be declared
-----------
on the Class B Interest payable in units of the
15
<PAGE>
Class B Interest, the number of Units then subject to any Option shall be
adjusted by adding the number of units of Class B Interest which would be
distributable thereon if such Units had been outstanding on the date fixed for
determining the limited partners entitled to receive such Class B Interest. In
the event of a split-up of the Class B Interests there shall be substituted for
each Unit of the Class B Interests then subject to any Option the number of
units of Class B Interest into which each outstanding unit of Class B Interest
shall be so changed. In the event that there shall be any change, other than as
specified in this Section 16(a), in the number or kind of outstanding units of
the Class B Interest, or other securities into which the Class B Interest shall
have been changed, or for which it shall have been exchanged, then, if the
Managing General Partner shall, in the reasonable exercise of its judgment,
determine that such change equitably requires an adjustment in the number or
kind of units then subject to any Option, such adjustment shall be made by the
Managing General Partner and shall be conclusive, effective and binding for all
purposes of the Plan.
(b) If the Partnership purchases any substantial productive assets or
sells any substantial productive assets (in either case, an "Adjustment Event")
and as a result the Thresholds and/or the amounts set forth on Exhibit A do not
operate so as to achieve their intended purposes equitable adjustments to the
Plan shall be made as follows: (i) the Managing General Partner shall
16
<PAGE>
in good faith estimate the aggregate amount (the "Aggregate Adjustment Amount")
of EBITDA attributable to the purchased or sold assets with respect to the
period commencing on the date of the Adjustment Event and ending on the last day
of the sixtieth month following August 31, 1992 (the "Threshold Date"); (ii) the
Aggregate Adjustment Amount shall be appropriately added to or subtracted from
the Thresholds; and (iii) the amounts set forth on Exhibit A shall be increased
or decreased, as appropriate, by allocating the Aggregate Adjustment Amount pro
rata among all of the full calendar months remaining prior to the Threshold
Date. Any adjustment(s) made pursuant to this Section 16(b) shall be made by
action of the Managing General Partner, whose determination shall be conclusive,
effective and binding for all purposes of the Plan.
17. Amendment or Discontinuance of the Plan. The Managing General Partner
---------------------------------------
may, insofar as permitted by law, amend, suspend, or discontinue the Plan at any
time without restriction; provided, however, that (i) neither the Managing
-------- -------
General Partner nor the Partnership may alter, amend, suspend or discontinue or
revoke or otherwise impair the rights of any holder of any outstanding Options
which have been granted pursuant to the Plan and which remain unexercised,
except as contemplated by Section 16 above, or except in the event that there is
secured the written consent of such holder, (ii) neither the Managing General
Partner nor the Partnership may alter or amend Exhibit A hereto,
17
<PAGE>
except as contemplated by Section 16 above, or except in the event that there is
secured the written consent of each of the holders of the then outstanding
Options, and (iii) the Managing General Partner may not amend, alter or revise
the Plan to change the number of Units subject to the Plan or change the
description of the class of employees eligible to receive Options. Nothing
contained in this paragraph, however, shall in any way condition or limit the
termination of an Option as hereinabove provided where reference is made to
termination of employment of an Optionee. The Option Period of any outstanding
Option shall not be extended by any amendment or suspension or discontinuance of
the Plan.
18. Liquidation of the Partnership. In the event of the complete
------------------------------
liquidation or dissolution of the Partnership, any Options granted pursuant to
the Plan and remaining unexercised shall be deemed cancelled without regard to
or limitation by any other provision of the Plan, provided that if the
Partnership and its business and assets shall be incorporated, such successor
corporation shall adopt a management Option plan which shall contain
substantially the same terms as the Plan, including, without limitation, terms
which define the type of events and conditions that will constitute a Transfer
Event (it being understood that a change in control of the board of directors of
the general partner of the Managing General Partner shall, following an
incorporation of the Partnership, mean a change in
18
<PAGE>
control of the board of directors of such successor corporation pursuant to
which a single Person other than an Affiliate of the Partnership (or such
successor corporation) acquires control of such board of directors), and such
successor corporation's plan shall provide for the continuation of any Options
previously granted pursuant to the Plan and remaining unexercised at the time of
such incorporation.
19. Notwithstanding anything to the contrary set forth herein, it is
acknowledged that the Specified Debt Agreements (as such term is defined in the
Partnership Agreement) place certain limitations and/or restrictions on the
exercise of the rights, powers, and privileges set forth herein, and, by
acceptance of an Option, an Optionee expressly agrees that notwithstanding any
other provision herein, such rights, powers and privileges hereunder are subject
to such limitations and/or restrictions set forth in the Specified Debt
Agreements and that the payment of obligations hereunder shall not be made at
any time at which the provisions of the Specified Debt Agreements prohibit such
payment or if such payment would constitute a default thereunder. By accepting
an Option, Optionee expressly agrees not to assert, participate in or bring any
action, suit or proceeding (including, without limitation, any bankruptcy or
insolvency proceedings) either at law or in equity against the Partnership, any
other Partner or any of their respective properties or assets, for the
enforcement, collection or realization of any of such obligations.
19
<PAGE>
Exhibit 10.35
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
Agreement, made as of the 31st day of August, 1992, between MLP Operating,
L.P., a Delaware limited partnership (the "Company"), and John R. Jester,
residing at 7939 Lake View Lane, Mercer Island, WA 98040 (the "Executive").
WHEREAS, the Company desires to acquire the services of the Executive, and
the Executive desires to provide such services to the Company;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Employment and Term. The Company hereby employs the Executive, and
-------------------
the Executive hereby accepts such employment, in the capacities and upon the
terms and conditions hereinafter set forth, for the five-year period commencing
on the date hereof and terminating on the fifth anniversary of the date hereof,
unless sooner terminated as hereinafter provided (the "Term of Employment").
2. Duties. During the Term of Employment, the Executive will serve as
------
the President of the Company. In such capacity, the Executive shall perform such
duties and shall have such responsibilities as are normally associated with such
position, and as otherwise may be assigned to the Executive from time to time by
or upon the authority of MLP Acquisition, L.P., the managing general partner
(the "Managing General Partner") of the Company. The Executive hereby agrees to
accept such employment and to serve the Company faithfully, diligently,
industriously and to the best of his ability in such capacities, with undivided
loyalty, devoting all of his business time, attention, knowledge, energy and
skills to such employment; provided, however, that nothing in this Section 2
shall preclude the Executive from devoting reasonable amounts of time,
attention, knowledge, energy, loyalty and skills to (i) personal, civic, and
charitable activities and to personal investments which do not violate any of
the other provisions of this Agreement, if such activities and such investments
do not interfere with the performance by the Executive of his duties and
obligations as President of the Company, and (ii) the Executive's involvement
with either of Flying Shuttle, Inc. or Arrow Metals, Inc., if such involvement
does not interfere with the performance by the Executive of his duties and
obligations as President of the Company.
3. Compensation.
------------
As compensation to the Executive for performance of the services required
hereunder and as consideration for his execution and delivery of this Agreement,
the Company shall pay him, and the Executive agrees to accept, the following
<PAGE>
salary, bonus and other compensation and benefits:
(a) a base salary, payable in equal installments not less frequently
than monthly, at the initial rate of $194,250 per annum, and to be
increased annually by the percent change, if any, during the preceding year
in the Consumer Price Index of the Bureau of Labor Statistics of the U.S.
Department of Labor for Urban Wage Earners and Clerical Workers (Seattle)
("Base Rate");
(b) a bonus, payable as soon as practicable after the end of each
successive twelve-month period commencing on the date hereof (each a "12
Month Period") during the term hereof equal to (i) fifty (50%) percent of
the Executive's Base Rate for such 12 Month Period, as applicable, if the
Company's cumulative "EBITDA" (as defined in the Company's Management
Option Plan) for such 12 Month Period is equal to or exceeds the aggregate
amounts set forth in column I of Exhibit A annexed to the Company's
Management Option Plan for such 12 Month Period ("On Plan"). If the
Company's cumulative EBITDA for any such 12 Month Period, as applicable, is
less than the aggregate amounts set forth in column I of Exhibit A annexed
to the Company's Management Option Plan for such 12 Month Period, the
Managing General Partner nevertheless shall have the discretion to award a
bonus to the Executive in an amount, if any, and on the terms determined by
the Managing General Partner; and
(c) such other and additional benefits as may from time to time be
determined by the Managing General Partner to be applicable to the
Executive, which shall be relatively commensurate to benefits accorded
other executives of the Company by virtue of their executive positions or
salary level but which in any event shall reflect the Executive's position
as President of the Company, including, without limitation, four weeks
vacation per year and a reasonable car allowance during the Term of
Employment. For purposes of determining the Executive's entitlement to
such other and additional benefits, the Company shall consider the length
of time the Executive was employed by the Company's predecessor. Nothing in
this Agreement shall limit the Executive's entitlement during the term of
this Agreement or thereafter to participate in any retirement, disability,
life insurance, savings or other plans of the Company as and to the same
extent as he would participate thereunder but for this Agreement.
-2-
<PAGE>
4. Permanent Disability. In the event of the permanent disability (as
--------------------
hereinafter defined) of the Executive during the Term of Employment, the Company
shall have the right, upon written notice to the Executive, to terminate the
Executive's employment hereunder, effective upon the giving of such notice.
Upon such termination, the Company shall have no further obligations hereunder,
except that the Executive shall be entitled to continue to receive, and shall be
paid, (x) the salary to which the Executive would be entitled pursuant to
Section 3 during the twelve-month period following the date of such termination
and (y) a pro rata portion of his bonus for the 12 Month Period during which the
Executive was so terminated, which portion shall be determined by multiplying
the bonus to which the Executive would have been entitled under Section 3(b) had
such termination not occurred by a fraction the numerator of which shall be the
number of months elapsed in such 12 Month Period prior to such termination and
the denominator of which shall be twelve (12); provided, that such pro rata
--------
bonus shall only be payable if the Company's cumulative EBITDA for the twelve-
month period preceding such termination is equal to or exceeds the aggregate
amounts set forth in column I of Exhibit A annexed to the Company's Management
Option Plan for such twelve-month period. The Executive shall accept such
payments in full discharge and release of the Company of and from any further
obligations under this Agreement (other than to pay compensation or benefits
which accrued prior to the date of such termination), but the Executive shall
continue to have the obligations provided for in Section 6 hereof. For purposes
of this paragraph, "permanent disability" shall be defined as (i) "permanent
disability" within the meaning of the disability insurance policy then
maintained by the Company for the benefit of employees of the Company, or (ii)
if no such policy shall then be in effect, any physical or mental disability or
incapacity which renders the Executive incapable of fully performing the
services required of him in accordance with his obligations under Section 2
hereof for a period of 180 consecutive days or for shorter periods aggregating
180 days during any 52-week period.
5. Death. In the event of the death of the Executive during the Term of
-----
Employment, this Agreement shall automatically terminate, and the Company shall
have no further obligations hereunder, except that the salary to which the
Executive is entitled pursuant to Section 3 shall continue to be paid during the
twelve-month period following such termination to the last beneficiary
designated by the Executive by written notice to the Company or, failing such
designation, to his estate and, in addition, such payee shall be paid a pro rata
portion of the Executive's bonus for the 12 Month Period during which the
Executive was so terminated, which portion shall be determined by multiplying
the bonus to which the Executive would have been entitled under Section 3(b) had
such termination not occurred by
-3-
<PAGE>
a fraction the numerator of which shall be the number of months elapsed in such
12 Month Period prior to such termination and the denominator of which shall be
twelve (12); provided, that such pro rata bonus shall only be payable if the
--------
Company's cumulative EBITDA for the twelve-month period preceding such
termination is equal to or exceeds the aggregate amounts set forth in column I
of Exhibit A annexed to the Company's Management Option Plan for such twelve-
month period. The Executive shall have the right to name, from time to time, any
one person as beneficiary hereunder or, with the consent of the Managing General
Partner, he may make other forms of designation of beneficiary or beneficiaries.
The Executive's designated beneficiary or personal representative, as the case
may be, shall accept the payments provided for in this Section 5 in full
discharge and release of the Company of and from any further obligations under
this Agreement (other than to pay compensation or benefits which accrued prior
to the date of such termination).
6. Restrictive Covenants and Confidentiality.
-----------------------------------------
(a) For the purposes hereof, (i) "Affiliated Companies" shall mean,
with respect to the Company, any corporation, subsidiary, limited
partnership, general partnership, association, joint-stock company, joint
venture, trust, bank, trust company, land trust, business trust, fund or
any organized group of persons, whether or not a legal entity, that is
directly or indirectly controlling, controlled by or under common control
with, the Company and which is engaged, in whole or in part, in the
"Business of the Company", and (ii) "Business of the Company" shall mean
the business of providing on-location and broadcast business services,
which include producing, marketing and distributing programmed music, music
video services, data communications services, electronic publication and
information distribution services, video communications services, in-store
advertising and promotion services, related equipment and ancillary
communications and related services provided, that, for purposes of this
-------- ----
Section 6, the Business shall be deemed to include data communication
services, electronic publication and information distribution services,
video communication services and in-store advertising and promotion
services, solely to the extent that such services, directly or indirectly,
compete with the delivery of services by the Company to the Company's
customers as conducted by the Company as of the date of the termination of
the Executive's employment and/or as contemplated by the Company as of such
date of termination to be delivered thereafter.
(b) The Executive agrees that during the Term of Employment and for a
period of two years thereafter he will not:
-4-
<PAGE>
(i) solicit, raid, entice or induce any person, firm or
corporation that presently is or at any time shall be a customer of
the Company, or any Affiliated Companies, to become a customer of any
other person, firm or corporation for products or services the same
as, or similar in function and purpose to, those products and services
which, during the Term of Employment, were being and continue to be
provided by the Company or any Affiliated Companies, and the Executive
shall not approach any such person, firm or corporation for such
purpose or assist any other person, firm or corporation in taking any
such other action;
(ii) solicit, raid, entice or induce any person that then is or
at any time during the twelve-month period prior to the end of the
Term of Employment shall be an employee of the Company, or any of its
Affiliated Companies (other than a person whose employment with the
Company or any Affiliated Companies is terminated subsequent to the
Term of Employment), to become employed by any person, firm or
corporation, and the Executive shall not approach any such employee
for such purpose or assist any other person, firm or corporation in
taking any such other action.
(c) During the Term of Employment and for a period of five years
thereafter, the Executive will not use or disclose, furnish or make
accessible to anyone, directly or indirectly, any Protected Information in
any Unauthorized manner or for any Unauthorized purpose (as such terms are
hereinafter defined):
(i) as used in this Agreement, the term "Protected Information"
shall mean trade secrets, confidential or proprietary information, and
all other knowledge, know-how, information, documents or materials,
owned, developed or possessed by Company, whether in tangible or
intangible form, pertaining to the Business of the Company, the
confidentiality of which the Company takes reasonable measures to
protect, including, but not limited to, the Company's research and
development operations, customers (including identities of customers
and prospective customers, identities of individual contacts at
business entities which are customers or prospective customers, prices
and costs of services, proprietary processes, proprietary techniques,
contract terms, financial information, proprietary business methods,
future business plans, data bases, computer programs, proprietary
designs, proprietary models,
-5-
<PAGE>
proprietary operating procedures, confidential knowledge of the
organization, and other information similarly of a confidential nature
and owned, developed or possessed by the Company; provided, however,
-------- -------
that Protected Information shall not include information that shall
become generally known to the public or the trade without violation of
this Section 6 or which can be shown to have been known to the person
or entity to whom such information was disclosed by the Executive
prior to the Executive's disclosure to such person or entity, which
person or entity acquired such knowledge otherwise than by a violation
of any other confidentiality and/or disclosure agreement applicable to
such person or entity and/or to any person or entity who initially
imparted such knowledge to such person or entity and/or not otherwise
in violation of law.
(ii) as used in this Agreement, the term "Unauthorized" shall
mean: (A) in contravention of the Company's policies or procedures as
in effect during the Term of Employment or otherwise made known to the
Executive thereafter; (B) otherwise inconsistent with the Company's
measures (as in effect during the Term of Employment or otherwise made
known to the Executive thereafter) to protect its interests in its
Protected Information; (C) in contravention of any lawful instruction
or directive, either written or oral, of an employee of the Company
empowered to issue such instruction or directive during the Term of
Employment or otherwise made known to the Executive thereafter; (D) in
contravention of any fiduciary duty existing under law or contract; or
(E) a disclosure which the Executive knows at the time of making such
disclosure would have a material adverse effect on the Company, unless
such disclosure is made with the prior approval of the Managing
General Partner. Notwithstanding anything to the contrary contained
in this Section 6, in the event that the Executive is required to
disclose any Protected Information by court order or decree or in
compliance with the rules and regulations of a governmental agency or
in compliance with law, prior to such disclosure the Executive will
provide the Company with prompt notice of such required disclosure so
that the Company may seek an appropriate protective order and/or waive
the Executive's compliance with the provisions of this Section 6. If,
in the absence of a protective order or the receipt of a waiver
hereunder, the Executive is advised by his counsel, at the Company's
expense, that such disclosure is necessary to comply with such court
order, decree, rule, regulation or law, the Executive may disclose
such
-6-
<PAGE>
information without liability hereunder.
(d) The Executive agrees that all new processes, techniques, know-
how, inventions, plans, products, patents and devices developed, made or
invented by the Executive, alone or with others in connection with the
Executive's employment hereunder, during the Term of Employment, shall
become and be the sole property of the Company unless released in writing
by the Company.
(e) The Executive agrees that during the Term of Employment, and, in
consideration of the payment of $75,000 to Executive upon the Executive's
termination of employment by the Company with respect to the first such
year, and the payment of $75,000 to Executive upon the first anniversary of
such termination with respect to the second such year, for a period of two
years thereafter, the Executive will not, directly or indirectly, engage or
participate or make any financial investments in or become employed by, or
act as an agent or principal of, or render advisory or other management
services to or for, any person, firm or corporation in connection with any
business activity directly or indirectly in competition with the Business
of the Company within any state of the United States where the Company or
any of its Affiliated Companies is then transacting the Business of the
Company. Nothing herein contained, however, shall restrict the Executive
from making any investments in any company whose stock is listed on a
national securities exchange or actively traded in the over-the-counter
market, so long as such investment does not give the Executive the right to
control or influence the policy decisions of any such business or
enterprise in connection with any business activity which is directly or
indirectly in competition with the Business of the Company.
(f) The provisions of this Section 6 shall survive the termination of
the Executive's employment hereunder.
(g) The Executive acknowledges that the services to be rendered by
the Executive are of a special, unique and extraordinary character and, in
connection with such services, the Executive will have access to
confidential information vital to the Company's and any Affiliated
Company's business. By reason of this, the Executive consents and agrees
that in such case if the Executive violates any of the provisions of this
Agreement, the Company and its Affiliated Companies would sustain
irreparable harm and, therefore, in addition to any other remedies which
the Company may have under this Agreement or otherwise, the Company shall
be entitled to seek specific enforcement and/or an injunction from any
court of competent
-7-
<PAGE>
jurisdiction restraining the Executive from committing or continuing any
such violation of this Agreement, provided, that if any such injunction of
--------
a temporary nature shall be issued, the Company shall use its best efforts
to schedule a hearing on the merits with respect to such injunction within
ten (10) business days of the issuance of such injunction and otherwise as
soon thereafter as possible. The Executive acknowledges that damages at law
may not be an adequate remedy for violation of this Section 6. Nothing
herein shall be construed as prohibiting the Company from pursuing any
other remedies available to the Company for such breach or threatened
breach, including the recovery of damages from the Executive.
(h) If any of the restrictions on activities contained in this
Section 6 shall for any reason be held by a court of competent jurisdiction
to be excessively broad as to duration, geographical scope, activity of
subject, such restrictions shall be construed so as thereafter to be
limited or reduced to be enforceable to the extent compatible with the
applicable law as it shall then appear; it being understood that by the
execution of this Agreement the parties hereto regard such restrictions as
reasonable and compatible with their respective rights.
7. Deductions and Withholding. The Executive agrees that the Company
--------------------------
shall withhold from any and all compensation required to be paid to the
Executive pursuant to this Agreement all Federal, state, local and/or other
taxes which are required to be so withheld in accordance with applicable
statutes and/or regulations from time to time in effect.
8. Termination For Cause. The Company shall have the right to terminate
---------------------
the Executive's employment under this Agreement prior to the expiration of the
fifth anniversary of the date hereof if the Managing General Partner elects to
remove the Executive from his duties for cause, in which case this Agreement
shall terminate and the Executive shall be removed from office effective on the
date specified by the Managing General Partner, provided that the Executive's
obligations provided in Section 6 hereof shall continue. Upon a termination of
Executive's employment pursuant to this Section 8, the Company shall have no
further obligations hereunder other than to pay the Executive an amount equal to
any accrued but unpaid salary at the Base Rate through the date of such
termination. For purposes of this Agreement, removal of the Executive from
office shall be deemed to be for cause if:
(a) such removal shall have been as a result of fraud, knowing
misrepresentation to the Managing General Partner or
-8-
<PAGE>
embezzlement on the part of the Executive (such determination to be made by
the Managing General Partner in its reasonable judgment);
(b) the Executive has been indicted for or convicted of any felony or
misdemeanor and a reasonable determination is made by the Managing General
Partner that such indictment or conviction has had or will have a material
adverse effect upon the business, operations or financial condition of the
Company; or
(c) the Executive has materially failed to discharge his duties,
responsibilities or obligations under this Employment Agreement in the
reasonable determination of the Managing General Partner and such failure
continues for 30 days after the Executive receives written notice from the
Managing General Partner advising the Executive of the specific nature of
such failure and that such failure must be corrected within 30 days to
avoid a termination of the Executive's employment, or the Executive has
acted, whether or not in connection with his employment hereunder, in a
manner that in the reasonable determination of the Managing General Partner
brings the Company into disrepute and will have a material adverse effect
upon the business, operations or financial condition of the Company.
9. Other Permitted Termination.
---------------------------
(a) the Company shall have the right to terminate the Executive's
employment under this Agreement prior to the fifth anniversary of the date
hereof if the Managing General Partner elects to remove the Executive from
his duties in connection with the occurrence of the following events:
(i) a material default under any of the Company's credit
agreements, which default has not been waived by the relevant lender,
has occurred and is continuing, and such default has either continued
for a period of 60 days or is reasonably likely to result in an
acceleration of the indebtedness due thereunder; or
(ii) as of the last day of any calendar month, the Company's
cumulative EBITDA is not equal to or greater than 80% of the aggregate
amounts set forth in column I of Exhibit A annexed to the Company's
Management Option Plan for the period beginning on the date hereof and
ending on the last day of such calendar month.
-9-
<PAGE>
(b) notwithstanding anything to the contrary contained herein,
the Company shall have the right to terminate the Executive's employment
under this Agreement without cause prior to the fifth anniversary of the
date hereof.
Upon a termination of Executive's employment pursuant to Section 9(a), the
Company shall pay to the Executive (i) the salary to which the Executive
otherwise would have been entitled pursuant to Section 3 during the twelve-month
period following the date of such termination and (ii) a pro rata portion of his
bonus for the 12 Month Period during which the Executive was so terminated,
which portion shall be determined by multiplying the bonus to which the
Executive would have been entitled under Section 3(b) had such termination not
occurred by a fraction the numerator of which shall be the number of months
elapsed in such 12 Month Period prior to such termination and the denominator of
which shall be twelve (12); provided, that such pro rata bonus shall only be
--------
payable if the Company's cumulative EBITDA for the twelve-month period preceding
such termination is equal to or exceeds the aggregate amounts set forth in
column I of Exhibit A annexed to the Company's Management Option Plan for such
twelve-month period. Upon a termination of Executive's employment pursuant to
Section 9(a), the Executive's obligations provided in Section 6 hereof shall
continue.
Upon a termination of the Executive's employment pursuant to Section 9(b), the
Company shall only be obligated to pay to the Executive (A) a pro rata portion
of his bonus for the 12 Month Period during which the Executive was so
terminated, which portion shall be determined by multiplying the bonus to which
the Executive would have been entitled under Section 3(b) had such termination
not occurred by a fraction the numerator of which shall be the number of months
elapsed in such 12 Month Period prior to such termination and the denominator of
which shall be twelve (12) ; provided, that such pro rata bonus shall only be
--------
payable if the Company's cumulative EBITDA for the twelve-month period preceding
such termination is equal to or exceeds the aggregate amounts set forth in
column I of Exhibit A annexed to the Company's Management Option Plan for such
twelve-month period, and (B) an amount equal to the lesser of (i) an amount
equal to two times the Executive's Base Rate in effect at the time the
Executive's employment was so terminated and (ii) an amount equal to the salary
which the Executive would otherwise have been entitled to receive (based upon
the Base Rate in effect at the time of such termination) pursuant to Section
3(a) from the date of such termination through the fifth anniversary of the date
hereof; provided, however, that in no event shall the Executive receive an
-------- -------
amount of salary which is less than one years' salary which the Executive would
have otherwise been entitled to receive pursuant to Section 3(a) at the Base
Rate in
-10-
<PAGE>
effect at the time of such termination. Upon a termination of Executive's
employment pursuant to Section 9(b), the Executive's obligations provided in
Section 6 hereof shall continue.
For purposes of the Company's Management Option Plan, any termination of the
Executive's employment under this Section 9 shall not be treated as a
termination for Cause (as such term is used in such Option Plan), and for
purposes of the Amended and Restated Agreement of Limited Partnership of MLP
Operating, L.P., dated as of August 31, 1992, any termination of the Executive's
employment other than for cause pursuant to Section 8 or voluntary resignation
(not to include death or disability) shall be treated as a Retirement (as such
term is used in such Agreement of Limited Partnership).
10. Entire Agreement. This Agreement embodies the entire agreement of the
----------------
parties with respect to the Executive's employment, and supersedes any and all
other agreements or arrangements, whether written or oral, which the Executive
may have had with the Company, the Company's predecessor or any affiliate of the
predecessor, with respect to the Executive's employment, including that certain
Employment Letter from The Field Corporation to the Executive, dated December
15, 1987. This Agreement may not be changed or terminated orally but only by an
agreement in writing signed by the parties hereto.
11. Waiver. The waiver by the Company of a breach of any provision of
------
this Agreement by the Executive shall not operate or be construed as a waiver of
any subsequent breach by him. The waiver by the Executive of a breach of any
provision of this Agreement by the Company shall not operate or be construed as
a waiver of any subsequent breach by the Company.
12. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Washington, without giving effect to
the conflict of laws principles thereof.
13. Assignability. The obligations of the parties may not be delegated
-------------
and, except as expressly provided in Section 5 relating to the designation of
beneficiaries, neither party may, without the other party's written consent
thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise
dispose of this Agreement or any interest herein. Any such attempted delegation
or disposition shall be null and void and without effect.
14. Severability. If any provision of this Agreement as applied to either
------------
party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this
-11-
<PAGE>
Agreement or the validity or enforceability of this Agreement.
15. Notices. All notices and other communications to be given or to
-------
otherwise be made to any party to this Agreement shall be deemed to be
sufficient if contained in a written instrument delivered in person or duly sent
by first class registered or certified mail or by a recognized national courier
service, postage or charges prepaid, (a) to the Company at 400 North 34th
Street, Suite 200, Seattle, Washington, 98103, Attention: MLP Acquisition, L.P.
(Managing General Partner) and (b) to the Executive, at the address set forth on
the first page of this Agreement, or to such other address as may be designated
in writing by the addressee to the addressor.
16. Section Headings. The section headings contained in this Agreement
----------------
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in one or more
------------
counterparts, which shall, collectively and separately, constitute one
agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement in
multiple originals.
MLP OPERATING, L.P.
By: MLP ACQUISITION, L.P.
Managing General Partner
By: MUSIC HOLDINGS CORP.
General Partner
By: /s/ Mark E. Jennings
-----------------------------------
Name:
Title: V.P
/s/ John R. Jester
---------------------------------------
John R. Jester
-12-
<PAGE>
Exhibit 10.36
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
Agreement, made as of the 31st day of August, 1992, between MLP Operating,
L.P., a Delaware limited partnership (the "Company"), and J.F. Harrison,
residing at 711 - 278th Street, N.E., Redmond, WA 98053 (the "Executive").
WHEREAS, the Company desires to acquire the services of the Executive, and
the Executive desires to provide such services to the Company;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Employment and Term. The Company hereby employs the Executive, and
-------------------
the Executive hereby accepts such employment, in the capacities and upon the
terms and conditions hereinafter set forth, for the five-year period commencing
on the date hereof and terminating on the fifth anniversary of the date hereof,
unless sooner terminated as hereinafter provided (the "Term of Employment").
2. Duties. During the Term of Employment, the Executive will serve as
------
Senior Vice President of the Company. In such capacity, the Executive shall
perform such duties and shall have such responsibilities as are normally
associated with such position, and as otherwise may be assigned to the Executive
from time to time by or upon the authority of MLP Acquisition, L.P., the
managing general partner (the "Managing General Partner") of the Company. The
Executive hereby agrees to accept such employment and to serve the Company
faithfully, diligently, industriously and to the best of his ability in such
capacities, with undivided loyalty, devoting all of his business time,
attention, knowledge, energy and skills to such employment; provided, however,
that nothing in this Section 2 shall preclude the Executive from devoting
reasonable amounts of time, attention, knowledge, energy, loyalty and skills to
(i) personal, civic, and charitable activities and to personal investments which
do not violate any of the other provisions of this Agreement, if such activities
and such investments do not interfere with the performance by the Executive of
his duties and obligations as Senior Vice President of the Company, and (ii) the
Executive's involvement with Arrow Metals, Inc., if such involvement does not
interfere with the performance by the Executive of his duties and obligations as
Senior Vice President of the Company.
3. Compensation.
------------
As compensation to the Executive for performance of the services
required hereunder and as consideration for his execution and delivery of this
Agreement, the Company
<PAGE>
shall pay him, and the Executive agrees to accept, the following salary and
other compensation and benefits:
(a) a base salary, payable in equal installments not less
frequently than monthly, at the initial rate of $157,000 per annum,
and to be increased annually by the percent change, if any, during the
preceding year in the Consumer Price Index of the Bureau of Labor
Statistics of the U.S. Department of Labor for Urban Wage Earners and
Clerical Workers (Seattle) ("Base Rate"); and
(b) such other and additional benefits as may from time to time
be determined by the Managing General Partner to be applicable to the
Executive, which shall be relatively commensurate to benefits accorded
other executives of the Company by virtue of their executive positions
or salary level but which in any event shall reflect the Executive's
position as Senior Vice President of the Company, including, without
limitation, four weeks vacation per year and a reasonable car
allowance during the Term of Employment. For purposes of determining
the Executive's entitlement to such other and additional benefits, the
Company shall consider the length of time the Executive was employed
by the Company's predecessor. Nothing in this Agreement shall limit
the Executive's entitlement during the term of this Agreement or
thereafter to participate in any retirement, disability, life
insurance, savings or other plans of the Company as and to the same
extent as he would participate thereunder but for this Agreement.
4. Permanent Disability. In the event of the permanent disability (as
--------------------
hereinafter defined) of the Executive during the Term of Employment, the Company
shall have the right, upon written notice to the Executive, to terminate the
Executive's employment hereunder, effective upon the giving of such notice.
Upon such termination, the Company shall have no further obligations hereunder,
except that the Executive shall be entitled to continue to receive, and shall be
paid, the salary to which he would be entitled pursuant to Section 3 during the
twelve-month period following the date of such termination. The Executive shall
accept such payments in full discharge and release of the Company of and from
any further obligations under this Agreement (other than to pay compensation or
benefits which accrued prior to the date of such termination), but the Executive
shall continue to have the obligations provided for in Section 6 hereof. For
purposes of this paragraph, "permanent disability"
-2-
<PAGE>
shall be defined as (i) "permanent disability" within the meaning of the
disability insurance policy then maintained by the Company for the benefit of
employees of the Company, or (ii) if no such policy shall then be in effect, any
physical or mental disability or incapacity which renders the Executive
incapable of fully performing the services required of him in accordance with
his obligations under Section 2 hereof for a period of 180 consecutive days or
for shorter periods aggregating 180 days during any 52-week period.
5. Death. In the event of the death of the Executive during the Term of
-----
Employment, this Agreement shall automatically terminate, and the Company shall
have no further obligations hereunder, except that the salary to which the
Executive is entitled pursuant to Section 3 shall continue to be paid during the
twelve-month period following his death to the last beneficiary designated by
the Executive by written notice to the Company or, failing such designation, to
his estate. The Executive shall have the right to name, from time to time, any
one person as beneficiary hereunder or, with the consent of the Managing General
Partner, he may make other forms of designation of beneficiary or beneficiaries.
The Executive's designated beneficiary or personal representative, as the case
may be, shall accept the payments provided for in this Section 5 in full
discharge and release of the Company of and from any further obligations under
this Agreement (other than to pay compensation or benefits which accrued prior
to the date of such termination).
6. Restrictive Covenants and Confidentiality.
-----------------------------------------
(a) For the purposes hereof, (i) "Affiliated Companies" shall
mean, with respect to the Company, any corporation, subsidiary, limited
partnership, general partnership, association, joint-stock company, joint
venture, trust, bank, trust company, land trust, business trust, fund or
any organized group of persons, whether or not a legal entity, that is
directly or indirectly controlling, controlled by or under common control
with, the Company and which is engaged, in whole or in part, in the
"Business of the Company", and (ii) "Business of the Company" shall mean
the business of providing on-location and broadcast business services,
which include producing, marketing and distributing programmed music, music
video services, data communications services, electronic publication and
information distribution services, video communications services, in-store
advertising and promotion services, related equipment and ancillary
communications and related services provided, that, for purposes of this
Section 6, the Business shall be deemed to include data communication
services, electronic publication and
-3-
<PAGE>
information distribution services and in-store advertising and promotion
services, solely to the extent that such services, directly or indirectly,
compete with the delivery of services by the Company to the Company's
customers as conducted by the Company as of the date of the termination of
the Executive's employment and/or as contemplated by the Company as of such
date of termination to be delivered thereafter.
(b) The Executive agrees that during the Term of Employment and for a
period of two years thereafter he will not:
(i) solicit, raid, entice or induce any person, firm or
corporation that presently is or at any time shall be a customer of
the Company, or any Affiliated Companies, to become a customer of any
other person, firm or corporation for products or services the same
as, or similar in function and purpose to, those products and services
which, during the Term of Employment, were being and continue to be
provided by the Company or any Affiliated Companies, and the Executive
shall not approach any such person, firm or corporation for such
purpose or assist any other person, firm or corporation in taking any
such other action;
(ii) solicit, raid, entice or induce any person that then is or
at any time during the twelve-month period prior to the end of the
Term of Employment shall be an employee of the Company, or any of its
Affiliated Companies (other than a person whose employment with the
Company or any Affiliated Companies is terminated subsequent to the
Term of Employment), to become employed by any person, firm or
corporation, and the Executive shall not approach any such employee
for such purpose or assist any other person, firm or corporation in
taking any such other action.
(c) During the Term of Employment and for a period of five years
thereafter, the Executive will not use or disclose, furnish or make
accessible to anyone, directly or indirectly, any Protected Information in
any Unauthorized manner or for any Unauthorized purpose (as such terms are
hereinafter defined):
(i) as used in this Agreement, the term "Protected Information"
shall mean trade secrets, confidential or proprietary information, and
all other knowledge, know-how, information, documents or
-4-
<PAGE>
materials, owned, developed or possessed by Company, whether in
tangible or intangible form, pertaining to the Business of the
Company, the confidentiality of which the Company takes reasonable
measures to protect, including, but not limited to, the Company's
research and development operations, customers (including identities
of customers and prospective customers, identities of individual
contacts at business entities which are customers or prospective
customers, prices and costs of services, proprietary processes,
proprietary techniques, contract terms, financial information,
proprietary business methods, future business plans, data bases,
computer programs, proprietary designs, proprietary models,
proprietary operating procedures, confidential knowledge of the
organization, and other information similarly of a confidential nature
and owned, developed or possessed by the Company; provided, however,
-------- -------
that Protected Information shall not include information that shall
become generally known to the public or the trade without violation of
this Section 6 or which can be shown to have been known to the person
or entity to whom such information was disclosed by the Executive
prior to the Executive's disclosure to such person or entity, which
person or entity acquired such knowledge otherwise than by a violation
of any other confidentiality and/or disclosure agreement applicable to
such person or entity and/or to any person or entity who initially
imparted such knowledge to such person or entity and/or not otherwise
in violation of law.
(ii) as used in this Agreement, the term "Unauthorized" shall
mean: (A) in contravention of the Company's policies or procedures as
in effect during the Term of Employment or otherwise made known to the
Executive thereafter; (B) otherwise inconsistent with the Company's
measures (as in effect during the Term of Employment or otherwise made
known to the Executive thereafter) to protect its interests in its
Protected Information; (C) in contravention of any lawful instruction
or directive, either written or oral, of an employee of the Company
empowered to issue such instruction or directive during the Term of
Employment or otherwise made known to the Executive thereafter; (D) in
contravention of any fiduciary duty existing under law or contract; or
(E) a disclosure which the Executive knows at the time of making such
disclosure would have a material adverse effect on the Company, unless
such disclosure is made with the prior approval of the Managing
General Partner. Notwithstanding
-5-
<PAGE>
anything to the contrary contained in this Section 6, in the event
that the Executive is required to disclose any Protected Information
by court order or decree or in compliance with the rules and
regulations of a governmental agency or in compliance with law, prior
to such disclosure the Executive will provide the Company with prompt
notice of such required disclosure so that the Company may seek an
appropriate protective order and/or waive the Executive's compliance
with the provisions of this Section 6. If, in the absence of a
protective order or the receipt of a waiver hereunder, the Executive
is advised by his counsel, at the Company's expense, that such
disclosure is necessary to comply with such court order, decree, rule,
regulation or law, the Executive may disclose such information without
liability hereunder.
(d) The Executive agrees that all new processes, techniques, know-
how, inventions, plans, products, patents and devices developed, made or
invented by the Executive, alone or with others in connection with the
Executive's employment hereunder, during the Term of Employment, shall
become and be the sole property of the Company unless released in writing
by the Company.
(e) The Executive agrees that during the Term of Employment, and, in
consideration of the payment of $75,000 to Executive upon the Executive's
termination of employment by the Company with respect to the first such
year, and the payment of $75,000 to Executive upon the first anniversary of
such termination with respect to the second such year, for a period of two
years thereafter, the Executive will not, directly or indirectly, engage or
participate or make any financial investments in or become employed by, or
act as an agent or principal of, or render advisory or other management
services to or for, any person, firm or corporation in connection with any
business activity directly or indirectly in competition with the Business
of the Company within any state of the United States where the Company or
any of its Affiliated Companies is then transacting the Business of the
Company. Nothing herein contained, however, shall restrict the Executive
from making any investments in any company whose stock is listed on a
national securities exchange or actively traded in the over-the-counter
market, so long as such investment does not give the Executive the right to
control or influence the policy decisions of any such business or
enterprise in connection with any business activity which is directly or
indirectly in competition with the Business of the Company.
-6-
<PAGE>
(f) The provisions of this Section 6 shall survive the termination of
the Executive's employment hereunder.
(g) The Executive acknowledges that the services to be rendered by
the Executive are of a special, unique and extraordinary character and, in
connection with such services, the Executive will have access to
confidential information vital to the Company's and any Affiliated
Company's business. By reason of this, the Executive consents and agrees
that in such case if the Executive violates any of the provisions of this
Agreement, the Company and its Affiliated Companies would sustain
irreparable harm and, therefore, in addition to any other remedies which
the Company may have under this Agreement or otherwise, the Company shall
be entitled to seek specific enforcement and/or an injunction from any
court of competent jurisdiction restraining the Executive from committing
or continuing any such violation of this Agreement, provided, that if any
--------
such injunction of a temporary nature shall be issued, the Company shall
use its best efforts to schedule a hearing on the merits with respect to
such injunction within ten (10) business days of the issuance of such
injunction and otherwise as soon thereafter as possible. The Executive
acknowledges that damages at law may not be an adequate remedy for
violation of this Section 6. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available to the
Company for such breach or threatened breach, including the recovery of
damages from the Executive.
(h) If any of the restrictions on activities contained in this
Section 6 shall for any reason be held by a court of competent jurisdiction
to be excessively broad as to duration, geographical scope, activity of
subject, such restrictions shall be construed so as thereafter to be
limited or reduced to be enforceable to the extent compatible with the
applicable law as it shall then appear; it being understood that by the
execution of this Agreement the parties hereto regard such restrictions as
reasonable and compatible with their respective rights.
7. Deductions and Withholding. The Executive agrees that the Company
--------------------------
shall withhold from any and all compensation required to be paid to the
Executive pursuant to this Agreement all Federal, state, local and/or other
taxes which are required to be so withheld in accordance with applicable
statutes and/or regulations from time to time in effect.
8. Termination For Cause. The Company shall have the
---------------------
-7-
<PAGE>
right to terminate the Executive's employment under this Agreement prior to the
expiration of the fifth anniversary of the date hereof if the Managing General
Partner elects to remove the Executive from his duties for cause, in which case
this Agreement shall terminate and the Executive shall be removed from office
effective on the date specified by the Managing General Partner, provided that
the Executive's obligations provided in Section 6 hereof shall continue. Upon a
termination of Executive's employment pursuant to this Section 8, the Company
shall have no further obligations hereunder other than to pay the Executive an
amount equal to any accrued but unpaid salary at the Base Rate through the date
of such termination. For purposes of this Agreement, removal of the Executive
from office shall be deemed to be for cause if:
(a) such removal shall have been as a result of fraud, knowing
misrepresentation to the Managing General Partner or embezzlement on the
part of the Executive (such determination to be made by the Managing
General Partner in its reasonable judgment);
(b) the Executive has been indicted for or convicted of any felony or
misdemeanor and a reasonable determination is made by the Managing General
Partner that such indictment or conviction has had or will have a material
adverse effect upon the business, operations or financial condition of the
Company; or
(c) the Executive has materially failed to discharge his duties,
responsibilities or obligations under this Employment Agreement in the
reasonable determination of the Managing General Partner and such failure
continues for 30 days after the Executive receives written notice from the
Managing General Partner advising the Executive of the specific nature of
such failure and that such failure must be corrected within 30 days to
avoid a termination of the Executive's employment, or the Executive has
acted, whether or not in connection with his employment hereunder, in a
manner that in the reasonable determination of the Managing General Partner
brings the Company into disrepute and will have a material adverse effect
upon the business, operations or financial condition of the Company.
9. Other Permitted Termination.
---------------------------
(a) the Company shall have the right to terminate the Executive's
employment under this Agreement prior to the fifth anniversary of the date
hereof if the Managing General Partner elects to remove the Executive from
his duties in
-8-
<PAGE>
connection with the occurrence of the following events:
(i) a material default under any of the Company's credit
agreements, which default has not been waived by the relevant lender,
has occurred and is continuing, and such default has either continued
for a period of 60 days or is reasonably likely to result in an
acceleration of the indebtedness due thereunder; or
(ii) as of the last day of any calendar month, the Company's
cumulative EBITDA (as defined in the Company's Management Option Plan)
is not equal to or greater than 80% of the aggregate amounts set forth
in column I of Exhibit A annexed to the Company's Management Option
Plan for the period beginning on the date hereof and ending on the
last day of such calendar month.
(b) notwithstanding anything to the contrary contained herein, the
Company shall have the right to terminate the Executive's employment under
this Agreement without cause prior to the fifth anniversary of the date
hereof.
Upon a termination of Executive's employment pursuant to Section 9(a), the
Company shall pay to the Executive a sum equal to the salary to which the
Executive otherwise would have been entitled pursuant to Section 3 during the
12-month period following the date of such termination. Upon a termination of
Executive's employment pursuant to Section 9(a), the Executive's obligations
provided in Section 6 hereof shall continue.
Upon a termination of the Executive's employment pursuant to Section 9(b), the
Company shall only be obligated to pay to the Executive an amount equal to the
lesser of (i) an amount equal to two times the Executive's Base Rate in effect
at the time the Executive's employment was so terminated and (ii) an amount
equal to the salary which the Executive would otherwise have been entitled to
receive (based upon the Base Rate in effect at the time of such termination)
pursuant to Section 3(a) from the date of such termination through the fifth
anniversary of the date hereof; provided, however, that in no event shall the
-------- -------
Executive receive an amount of salary which is less than one years' salary which
the Executive would have otherwise been entitled to receive pursuant to Section
3(a) at the Base Rate in effect at the time of such termination. Upon a
termination of Executive's employment pursuant to Section 9(b), the Executive's
obligations provided in Section 6 hereof shall continue.
For purposes of the Company's Management Option Plan, any termination of the
Executive's employment under this Section 9
-9-
<PAGE>
shall not be treated as a termination for Cause (as such term is used in such
Option Plan), and for purposes of the Amended and Restated Agreement of Limited
Partnership of MLP Operating, L.P., dated as of August 31, 1992, any termination
of the Executive's employment other than for cause pursuant to Section 8 or
voluntary resignation (not to include death or disability) shall be treated as a
Retirement (as such term is used in such Agreement of Limited Partnership).
10. Entire Agreement. This Agreement embodies the entire agreement of the
----------------
parties with respect to the Executive's employment, and supersedes any and all
other agreements or arrangements, whether written or oral, which the Executive
may have had with the Company, the Company's predecessor or any affiliate of the
predecessor, with respect to the Executive's employment. This Agreement may not
be changed or terminated orally but only by an agreement in writing signed by
the parties hereto.
11. Waiver. The waiver by the Company of a breach of any provision of
------
this Agreement by the Executive shall not operate or be construed as a waiver of
any subsequent breach by him. The waiver by the Executive of a breach of any
provision of this Agreement by the Company shall not operate or be construed as
a waiver of any subsequent breach by the Company.
12. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Washington, without giving effect to
the conflict of laws principles thereof.
13. Assignability. The obligations of the parties may not be delegated
-------------
and, except as expressly provided in Section 5 relating to the designation of
beneficiaries, neither party may, without the other party's written consent
thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise
dispose of this Agreement or any interest herein. Any such attempted delegation
or disposition shall be null and void and without effect.
14. Severability. If any provision of this Agreement as applied to either
------------
party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or the validity or enforceability of this
Agreement.
15. Notices. All notices and other communications to be given or to
-------
otherwise be made to any party to this Agreement shall be deemed to be
sufficient if contained in a written instrument delivered in person or duly sent
by first class
-10-
<PAGE>
registered or certified mail or by a recognized national courier service,
postage or charges prepaid, (a) to the Company at 400 North 34th Street, Suite
200, Seattle, Washington, 98103, Attention: MLP Acquisition, L.P. (Managing
General Partner) and (b) to the Executive, at the address set forth on the first
page of this Agreement, or to such other address as may be designated in writing
by the addressee to the addressor.
16. Section Headings. The section headings contained in this Agreement
----------------
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in one or more
------------
counterparts, which shall, collectively and separately, constitute one
agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement in
multiple originals.
MLP OPERATING, L.P.
By: MLP ACQUISITION, L.P.
Managing General Partner
By: MUSIC HOLDINGS CORP.
General Partner
By: /s/ Mark E. Jennings
------------------------------
Name:
Title: V.P
/s/ J.F. Harrison
----------------------------------
J.F. Harrison
-11-
<PAGE>
Exhibit 10.37
<PAGE>
MUZAK [LOGO OF MUZAK APPEARS HERE]
2901 Third Avenue
Suite 400
Seattle, WA 98121
Phone (206) 633-3000
Toll free (800) 331-3340
JOHN R. JESTER
President
July 7, 1995
Mr. Kirk A. Collamer
1152C North LaSalle Street
Chicago, Ill. 60610
Dear Kirk:
This letter will confirm our recent conversations during which we outlined an
offer to you to assume the position of Vice President, Finance and
Administration, and sets forth the terms of employment while you are a member of
the Muzak L.P. management team.
You will report to John Jester, President of Muzak, and will be responsible for
all of the duties associated with the job. Your start date will be August 1,
1995. You will move to Seattle by a mutually agreed to date to perform your
duties. Muzak will pay to move your household goods plus pay you $60,000 to
cover move expenses. In addition, Muzak will reimburse you for the amount the
sale price of your home in Chicago is less than $410,000. This provision will
be applicable to a sale price down to $375,000. Your salary will be $160,000
per year. In addition, you will be eligible for a discretionary bonus and
receive an automobile allowance of $500 per month. Muzak will also pay to rent
an apartment/condo for up to a two-month period for you to live in while you are
looking for a home. In addition, Muzak will pay for two house-hunting trips for
your wife.
You will be offered the opportunity to purchase up to 150,000 shares in Muzak
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L.P. at a value of $1.75/share. Muzak will make available loans equal to 50% of
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the number of shares you subscribe to on the same terms and conditions as the
other investors. The loans will be collateralized by your shares and options.
You will also be awarded 150,000 options to purchase additional shares at an
exercise price of $1.75/option share conditional on the performance of the
company. The details of the current option plan will be provided to you shortly
as it is presently under revision.
<PAGE>
Mr. Kirk A. Collamer
July 7, 1995
Page Two
You will be entitled to three weeks vacation per year. From the time of
employment you will be covered by the Muzak employee insurance, 401k and
retirement plans subject to the terms of those plans.
If you find this letter accurately reflects our discussions, please sign both
copies and return one to me. We feel fortunate to have you join us and look
forward to what we believe will be a challenging and mutually rewarding
association.
Sincerely,
/s/ John R. Jester
John R. Jester
President
JRJ:ld
/s/ Kirk A. Collamer
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Kirk A. Collamer
